LLQP Life Insurance · Component 4.1 · 10% of the exam
Under the replacement rules, if an agent fails to complete and deliver the required replacement disclosure:
- AThe new policy is automatically void, since the replacement was completed without the statutory disclosure the Act requires
- BThe insurer pays double the death benefit as a penalty for the agent's failure to complete the form
- CNothing happens, since the disclosure form exists to protect the agent rather than the client
- The agent may face regulatory penalties, and the client may have grounds for complaint if the replacement was unsuitable
Correct answer: D) The agent may face regulatory penalties, and the client may have grounds for complaint if the replacement was unsuitable
The curriculum lists 'replacement rules and non-compliance penalties' under the review process. Regulators treat undisclosed replacements as a serious conduct issue because replacements so often harm clients.
Why the other options are wrong
- AThe new policy is not automatically void.
- BThere is no double payment.
- CNon-compliance with replacement rules has consequences.
Exam tip
Replacement disclosure is a regulatory requirement; failing to complete it is a conduct breach with penalties.
Common mistake
Skipping the replacement declaration because the client 'already understands'.
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.