LLQP Ethics & Professional Practice · Component 1.1 · 60% of the exam
The principle of 'utmost good faith' (uberrimae fidei) in insurance contracts requires that:
- AThe agent guarantee that any claim will be paid, since the agent stands in the insurer's shoes at the point of sale and afterwards
- BNothing beyond the ordinary duty of honesty that applies to any commercial contract between two parties
- Both parties deal honestly and the applicant disclose every material fact, or the insurer may void within limits
- DOnly the insurer act honestly, since the applicant is protected as a consumer and owes no special duty
Correct answer: C) Both parties deal honestly and the applicant disclose every material fact, or the insurer may void within limits
Insurance is the classic contract of utmost good faith. The duty of disclosure is its main expression, tempered by the two-year incontestability rule.
Why the other options are wrong
- AAgents do not guarantee anything.
- BInsurance imposes a higher standard than ordinary contracts.
- DThe duty is mutual, and the applicant's disclosure is central.
Exam tip
Utmost good faith = full disclosure of material facts by the applicant.
Common mistake
Advising a client that they need only answer what is asked.
What this tests
CISRO competency component 1.1 — 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.