LLQP Life Insurance · Component 3.1 · 25% of the exam
The difference between a material misrepresentation and fraud on an application is that:
- AMisrepresentation is never a problem for the applicant, since the insurer had the chance to investigate before issue and accepted the risk as presented
- BFraud is only about money, whereas misrepresentation concerns health and lifestyle questions
- Misrepresentation is a false statement that would have affected underwriting; fraud adds intent, and can void the contract at any time
- DThere is no difference in practice, since both allow the insurer to void the contract within two years
Correct answer: C) Misrepresentation is a false statement that would have affected underwriting; fraud adds intent, and can void the contract at any time
An innocent but material misstatement lets the insurer void the policy within the two-year contestability period. Fraud — deliberate deception — is not protected by incontestability. A mistake that is not material (an irrelevant detail) does not affect the contract.
Why the other options are wrong
- AMaterial misrepresentation lets the insurer void the policy within two years.
- BFraud is any deliberate deception, not only financial.
- DThe two differ in intent and in consequences.
Exam tip
Misrepresentation: material, innocent or not, contestable for two years. Fraud: intent to deceive, contestable forever.
Common mistake
Believing incontestability protects a fraudulent application after two years.
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.