LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
The 'policy fund' or 'account value' provision of a universal life policy explains:
- AThe exclusions that apply to the death benefit, such as suicide within two years and hazardous activities
- BThe beneficiary designation and the shares in which the death benefit and fund will be paid
- How deposits are credited, charges deducted, returns credited, and how the fund affects the death benefit
- DThe agent's compensation and the trailer fees paid from the fund each year for ongoing service
Correct answer: C) How deposits are credited, charges deducted, returns credited, and how the fund affects the death benefit
UL transparency lies in this provision; clients must understand that the fund must sustain charges.
Why the other options are wrong
- AExclusions are dealt with in a separate provision.
- BThe beneficiary is dealt with in a separate provision.
- DThe agent's compensation does not appear in the contract.
Exam tip
UL fund: deposits − charges + credits; must sustain the policy.
Common mistake
Letting a UL fund run down until the policy lapses.
What this tests
CISRO competency component 1.4 — 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
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