LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
When replacing an existing life policy, the agent must:
- ACancel the old policy first, so the client is not paying two premiums while the new application is underwritten
- BSay nothing about the old policy, since the client's existing coverage is the client's own business and not the agent's
- CReplace only if the new commission exceeds the old, since the insurer's compensation structure signals which product is better
- Complete the replacement disclosure, compare the policies, explain the disadvantages, and keep the old policy until the new is in force
Correct answer: D) Complete the replacement disclosure, compare the policies, explain the disadvantages, and keep the old policy until the new is in force
Replacement rules exist because replacements are often against the client's interest. The declaration is filed with the insurers.
Why the other options are wrong
- AKeep the old policy until the new one is in force.
- BDisclosure is mandatory.
- CCompensation is irrelevant.
Exam tip
Replacement: LIRD/disclosure, compare, explain disadvantages, keep old until new in force.
Common mistake
Treating an 'add-on' policy as a replacement-free sale when the client intends to cancel the old one.
What this tests
CISRO competency component 2.2 — Integrate into practice the rules governing the activities of life insurance agents — which is weighted at 40% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 2
- A prospective client wants to confirm that an agent is properly licensed before meeting him. She should:
- A dual-licensed agent's mutual fund business is reviewed following a client complaint. The review will be conducted by:
- Assuris coverage applies to:
- OLHI's services are available to:
- Complaints about an agent's conduct (as opposed to an insurer's claim decision) should be directed to:
- The best summary of an agent's ethical obligations is to:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.