LLQP Life Insurance · Component 1.2 · 35% of the exam
A client's existing policy names her estate as beneficiary, and she has significant debts. The review should note that:
- ADebts are cancelled at death, so the estate designation is harmless and the family receives the full proceeds without any deduction
- BEstates cannot be beneficiaries under the Insurance Act, so the designation is void and must be replaced
- The proceeds will be available to creditors and subject to probate; naming an individual would protect them
- DThis is ideal, since the executor can use the proceeds to pay the debts before distributing the balance
Correct answer: C) The proceeds will be available to creditors and subject to probate; naming an individual would protect them
Creditor protection and probate avoidance depend on a named beneficiary (and, for creditor protection, a family-class or irrevocable one). For an indebted client, the estate designation defeats the very purpose of the coverage.
Why the other options are wrong
- ADebts are not cancelled at death; they are claims against the estate.
- BEstates can be named; it is simply a poor choice here.
- DAn estate designation for an indebted client exposes the proceeds to creditors.
Exam tip
Named family-class or irrevocable beneficiary → creditor protection and no probate. Estate → neither.
Common mistake
Leaving the beneficiary as the estate for a client with significant debts.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Life Insurance module. Written against the published curriculum.
More from component 1
- A client's existing policies were all sold by another agent who has left the business. The reviewing agent should:
- A client supports an adult child with a permanent disability who will never be self-sufficient. In the needs analysis this is:
- A self-employed client's income fluctuates widely year to year. When determining the income to replace, the agent should:
- A 58-year-old client plans to retire at 65 and has a pension that will pay a survivor benefit. How does time to retirement affect the life insurance need?
- Which of the following is a capital expense arising at death, rather than an ongoing income need?
- A client is the sole income earner in a household with a stay-at-home spouse and two young children. The greatest risk that life insurance on the client addresses is:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.