LLQP Life Insurance · Component 3.1 · 25% of the exam
An applicant fails to mention a condition because she honestly thought it was minor; it turns out to be material. Within the first two years the insurer may:
- AProsecute her for fraud, since an omission on an insurance application is treated as deliberate
- BRaise the premium retroactively to the rate that would have applied, but only for the years already paid
- CDo nothing, since an honest mistake is not misrepresentation under the Insurance Act
- Void the contract, because materiality rather than intent is the test during the contestability period
Correct answer: D) Void the contract, because materiality rather than intent is the test during the contestability period
The duty to disclose is judged by whether the fact would have influenced a reasonable insurer, not by the applicant's intent. That is why agents must probe answers and explain the consequences of incomplete disclosure.
Why the other options are wrong
- AInnocent misstatement is not fraud; prosecution is not the remedy.
- BThe insurer's remedy for material misrepresentation is avoidance, not re-pricing.
- CA material omission within the contestability period can void the policy.
Exam tip
During contestability the test is materiality, not intent. Probe every answer and explain why completeness matters.
Common mistake
Letting the client decide what is 'minor' enough to leave out.
What this tests
CISRO competency component 3.1 — 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.