LLQP Ethics & Professional Practice · Component 1.3 · 60% of the exam
The statutory rule on 'misrepresentation' within the contestability period allows the insurer to:
- ARaise premiums retroactively to the rate that would have applied had the facts been disclosed on the original application
- Void the contract and refund premiums for a material misrepresentation, even if unrelated to the cause of death
- COnly reduce the benefit in proportion to the premium that should have been charged
- DDo nothing, since the application forms part of the contract and the insurer accepted it as written
Correct answer: B) Void the contract and refund premiums for a material misrepresentation, even if unrelated to the cause of death
No causal link between the undisclosed fact and the claim is required within the two years. This is why full disclosure matters.
Why the other options are wrong
- APremiums cannot be raised retroactively.
- CThe remedy is rescission, not reduction.
- DRescission is available within the period.
Exam tip
Material misrepresentation within 2 years → void, no causal link needed.
Common mistake
Believing an unrelated omission cannot affect a claim.
What this tests
CISRO competency component 1.3 — 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.