LLQP Life Insurance · Component 3.2 · 25% of the exam
A client asks whether he should name his estate as beneficiary so his will can direct the money. The agent should explain:
- An estate designation subjects the proceeds to probate, delay and creditors; naming individuals is better
- BEstates cannot be named as beneficiaries under the Insurance Act, so the client must name an individual or a trust instead
- CWills override insurance designations, so the client can name anyone on the policy and the will's terms will govern
- DNaming the estate is always best, since it keeps all of the client's assets under the executor's control
Correct answer: A) An estate designation subjects the proceeds to probate, delay and creditors; naming individuals is better
Occasionally the estate is the right beneficiary (for example, to fund specific will provisions), but usually a direct designation is better. The recommendation should explain the trade-off and coordinate with the will.
Why the other options are wrong
- BEstates can be named; it is simply usually suboptimal.
- CDesignations override wills for insurance proceeds.
- DEstate designations have real disadvantages.
Exam tip
Estate as beneficiary: probate, delay, creditors. Use it only with a reason.
Common mistake
Defaulting to the estate because it 'keeps things simple'.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Life Insurance module. Written against the published curriculum.
More from component 3
- At policy delivery, the agent should obtain:
- The effective date of a life insurance policy is generally:
- A client's application is approved but he has not paid the first premium when the policy is delivered. The agent should:
- A pre-authorized debit form is part of implementation because:
- During implementation, the agent learns the client wants the policy owned by her corporation instead of personally, as first applied for. The correct step is:
- Which of the following is a legitimate reason an insurer might refuse to issue a policy even after favourable underwriting?
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.