LLQP Life Insurance · Component 2.1 · 30% of the exam
A client transfers ownership of a paid-up policy to a registered charity during her lifetime. The usual consequence is that she:
- receives a donation receipt, and a policy gain may arise on the transfer
- Bretains ownership of the policy while the charity is simply named as beneficiary
- Cmust first surrender the policy and donate the cash proceeds to the charity
- Dreceives no recognition at all until the policy eventually pays its death benefit
Correct answer: A) receives a donation receipt, and a policy gain may arise on the transfer
An absolute transfer of ownership is a disposition, so a gain above the adjusted cost basis can arise. The donor generally receives a receipt for the policy's value and for premiums paid afterward.
Why the other options are wrong
- BNaming a charity as beneficiary is a different arrangement entirely.
- CThe policy itself may be donated without being surrendered.
- DA lifetime transfer produces a receipt at the time it is made.
Exam tip
Donating ownership gives a lifetime receipt; designating gives one at death.
Common mistake
Confusing a transfer of ownership with a beneficiary designation.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.