LLQP Ethics & Professional Practice · Component 1.2 · 60% of the exam
When the owner and life insured are different people and the owner dies first:
- AThe policy terminates, since the contracting party is no longer alive to pay premiums or exercise the rights of ownership
- Ownership passes to the estate or a named contingent owner, and the policy continues on the life insured
- CThe insurer keeps the policy and its cash value, since no owner remains to exercise the rights
- DThe life insured becomes the beneficiary of the policy, since the owner's interest has ended
Correct answer: B) Ownership passes to the estate or a named contingent owner, and the policy continues on the life insured
Third-party ownership requires planning for the owner's death. Contingent owner designations solve it.
Why the other options are wrong
- AThe policy continues.
- CThe insurer holds no ownership.
- DOwnership, not beneficiary status, is at issue.
Exam tip
Name a contingent owner on third-party-owned policies.
Common mistake
Leaving a parent-owned policy on a child with no contingent owner.
What this tests
CISRO competency component 1.2 — 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.