LLQP Life Insurance · Component 4.1 · 10% of the exam
A policyholder wants to transfer her policy to her adult daughter as owner. The agent should explain that:
- An absolute assignment can transfer ownership, but it is a disposition that may create a gain
- BThe insurer must approve the daughter's health before the transfer, since the new owner's insurability affects the contract's terms
- COwnership cannot be transferred during the policyholder's lifetime, since the contract is personal to the original owner
- DThe daughter automatically becomes beneficiary as well as owner, since the two roles cannot be separated after a transfer
Correct answer: A) An absolute assignment can transfer ownership, but it is a disposition that may create a gain
Transfers of ownership are common in estate planning but have tax and control consequences. The client should understand she loses control of the policy and may owe tax on the transfer.
Why the other options are wrong
- BThe insured's health, not the new owner's, is what was underwritten.
- COwnership can be assigned.
- DBeneficiary and owner are separate; the new owner decides.
Exam tip
Ownership transfer = disposition + loss of control. Explain both.
Common mistake
Treating an ownership transfer as a paperwork formality.
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:
- 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:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.