LLQP Life Insurance · Component 3.1 · 25% of the exam
Underwriting is the process by which the insurer:
- Evaluates the risk presented by an applicant and decides whether to insure it and on what terms
- BInvests the premiums it collects so that reserves are available to pay claims as they arise
- CLicenses the agents who sell its products, after confirming they have passed the required examinations
- DPays claims once proof of death has been received and the beneficiary has been identified
Correct answer: A) Evaluates the risk presented by an applicant and decides whether to insure it and on what terms
Underwriters classify risk — standard, preferred, rated, declined — so that each insured pays a premium appropriate to their expected mortality. The agent's field underwriting (accurate, complete applications) is the first step.
Why the other options are wrong
- BInvesting premiums is the insurer's investment function.
- CLicensing is done by provincial regulators.
- DClaims are paid by the claims department, not underwriting.
Exam tip
Underwriting classifies risk so each insured pays a premium matching their expected mortality; the agent's accurate application is step one.
Common mistake
Thinking underwriting is only about medical exams.
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.