LLQP Life Insurance · Component 4.1 · 10% of the exam
A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
- AThe old policy is cancelled before applying, so the client is not paying two premiums while the new one is underwritten
- BThe old and new policies are both kept forever, so the client has the benefit of both contracts for life
- CThe premium for the new policy is paid to the agent, who holds it until the old policy has been cancelled
- The new policy is issued and in force before the old one is cancelled, and the replacement disclosure is completed
Correct answer: D) The new policy is issued and in force before the old one is cancelled, and the replacement disclosure is completed
Cancelling first risks a gap if the new application is rated, postponed or declined. The sequence — issue new, then cancel old — is basic replacement practice, alongside the required disclosure.
Why the other options are wrong
- ACancelling first creates an uninsured gap.
- BKeeping both defeats the purpose unless the client wants more coverage.
- CPremiums are paid to the insurer.
Exam tip
Replacement sequence: new in force first, then cancel old. Disclosure form always.
Common mistake
Cancelling the existing policy on the day of the new application.
What this tests
CISRO competency component 4.1 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- The primary purpose of a periodic policy review is to:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.