LLQP Ethics & Professional Practice · Component 1.4 · 60% of the exam
The 'settlement options' provision allows the death benefit to be paid:
- ATo the agent in trust, who then distributes the proceeds to the beneficiaries according to the owner's instructions
- BOnly as a lump sum, since the Act requires the insurer to pay the full benefit within thirty days of proof of death
- As a lump sum or under alternatives such as interest only, fixed period, fixed amount or life income
- DOnly as an annuity, since a lump sum would expose the beneficiary to the risk of mismanaging the proceeds
Correct answer: C) As a lump sum or under alternatives such as interest only, fixed period, fixed amount or life income
Settlement options provide structure for beneficiaries who may not manage a lump sum. Interest earned under options is taxable.
Why the other options are wrong
- AProceeds are never payable to the agent.
- BSettlement alternatives to a lump sum exist.
- DA lump sum is available.
Exam tip
Settlement options: lump sum, interest, fixed period, fixed amount, life income.
Common mistake
Ignoring settlement options for a vulnerable beneficiary.
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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