LLQP Ethics & Professional Practice · Component 1.5 · 60% of the exam
The exemption from seizure for a policy with a family-class beneficiary applies:
- Both while the life insured is alive, protecting the contract and cash value, and to the proceeds after death
- BOnly to the death benefit, since the cash value is the owner's property and available to the owner's creditors
- COnly after death, since the exemption is a protection for the beneficiary rather than for the owner
- DOnly to term policies, since the exemption was designed for protection products with no cash value
Correct answer: A) Both while the life insured is alive, protecting the contract and cash value, and to the proceeds after death
Lifetime protection of cash values is a distinctive advantage of insurance contracts, subject to fraudulent conveyance rules.
Why the other options are wrong
- BThe cash value is protected too.
- CThe exemption applies during the insured's lifetime.
- DIt applies to all life contracts, including segregated funds.
Exam tip
Family-class/irrevocable designation protects the contract during life and the proceeds at death.
Common mistake
Believing only the death benefit is protected.
What this tests
CISRO competency component 1.5 — Integrate into practice the legal aspects of insurance and annuity contracts — which is weighted at 60% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 1
- An 'assignee' of a life insurance policy is:
- A corporation as policyowner and beneficiary of a policy on a key employee:
- A 'trustee' named to receive proceeds on behalf of a beneficiary:
- The 'automatic premium loan' (APL) provision:
- A life insurance contract 'matures' when:
- The 'assignment' provision typically states that:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.