IFSE Institute LLQP Life License Qualification Program (LLQP) Exam Practice Test
Life License Qualification Program (LLQP) Questions and Answers
(Jim is buying a life annuity with insurance settlement money due to a disabling accident. He declines a guarantee period to maximize monthly payments.
Which of the following must the agent be sure to note on the application?)
Emma, an employee at MagicLand, is part of the company's group registered retirement savings plan (RRSP). During her tenure, she accumulated over $70,000 in the plan and all of her contributions are invested in segregated funds. She meets with Jun to invest in an individual segregated fund. Jun tells her that there are some differences between group and individual segregated funds.
How are Emma's group segregated funds DIFFERENT from an individual segregated fund?
(Jerry, aged 63, is getting ready to retire. His pension statement shows contributions, investment choices, and performance data.
From among the following types of pension plans, which one was Jerry a member of?)
Thien is 56 years old and has recently been diagnosed by his doctor with a heart condition for which there is no known treatment, and which has dramatically reduced his life expectancy. Thien has decided to take early retirement. Fortunately, after 30 years of service working as a credit officer at a local bank, he has accumulated a large sum in his pension plan. Thien's wife supports his decision to retire early. She is 49 and in good health, and plans to continue working and earning a lucrative income at her current position as a divorce lawyer at a prestigious law firm, at least until she reaches 65 years of age.
What type of annuity would BEST suit Thien's needs?
(Arthur's assets include a home worth $744,000, savings of $41,000, and a whole life insurance policy with a death benefit of $300,000 and a cash value of $196,000. His liabilities include a $150,000 reverse mortgage and $2,090 income tax owed.
What is Arthur's net worth?)
(Ulysses, aged 35, is a risk taker who likes to concentrate investments in specific industries expecting higher returns long term.
Which feature of segregated funds will be most appealing to Ulysses?)
(Gertrude wishes to invest her savings while having creditor protection and minimizing risk.
What type of segregated fund would be most suitable for her?)
(Priscilla is worried about losing her job in six months. She invests $1,000 per month in segregated equity funds but has limited cash savings.
What should her insurance agent, Arthur, advise?)
George, aged 72, has a number of medical conditions related to smoking and diabetes. He is planning the distribution of his estate, which is valued at $1.1 million. He will invest $1 million in a segregated fund and name his two daughters as equal beneficiaries. The remainder of the estate will go to George’s favourite charity. George has peace of mind knowing that even if markets are down at the time of his death, his daughters will together receive an inheritance greater than the charity.
What unique feature of segregated funds has enabled George to formulate his estate plan in this way?
Gaston’s wife died last month, leaving him a death benefit of $100,000 from her life insurance policy. Gaston, who is 60, wants to invest these funds in a safe investment that will mature when he retires at age 65 and thus provide him with added income. However, he wants to be able to easily withdraw funds at any time, if necessary. He would also like to be able to name his nephew as beneficiary.
What type of investment would best suit Gaston?
Luisa owns a balanced segregated fund currently valued at $50,000. Her mother Linda is the current revocable beneficiary of the policy. However, Luisa has been dating Benjamin for a year and would like to name him as the new beneficiary of her policy.
Which of the following statements about modifying the beneficiary designation is CORRECT?
Mathilde, aged 65, is seriously ill—though still mentally competent. She has therefore granted her son Jim power of attorney for property so that he will help manage her investments. She has contacted her life insurance agent, asking him to gather all the information needed to:
Transfer money from her balanced segregated fund into an income fund, and
Convert her RRIF into a life annuity.Some signatures are required to complete the transactions.
With his power of attorney, what can Jim do if he goes to the agent’s office by himself?
(Jorge meets with his new financial advisor. He brought a series of documents so that she can determine his investor profile.
Which of the following documents will not be helpful for determining Jorge’s investor profile?)
Mark, aged 26, works as a farmhand on his family’s farm. Mark’s grandfather recently passed away and left Mark a $100,000 cash inheritance. Having little investment experience, Mark approaches Devon, a locally licensed life insurance agent, for investment advice.
Mark tells Devon that his investment objectives include the growth of his principal over time, but that he wants it readily available if he were to purchase available land.
Given Mark’s objectives, what investment concepts should Devon be explaining to him?
Lily is an experienced realtor. She has been in the business for over 40 years and has made good money throughout her career. She now feels ready to retire and will do so in five months. Most of her assets are in real estate properties. Even within her RRSP and TFSA accounts, she only owns segregated real estate funds. As Lily is not entitled to any pension, she will heavily rely on her RRSP and TFSA accounts as sources of income. These accounts are now worth $850,000 and $130,000 respectively. Once retired, Lily might also make larger withdrawals from time to time to travel abroad.
Which one of the following risks will Lily be most exposed to after she retires?
Gertrude, age 52, meets with her life insurance agent so he can determine her investor profile. During the interview, the agent learns important information. Gertrude expects to live as long as her mother, who is 92 years of age. Also, Gertrude’s employer has announced a series of possible layoffs in her department. Lastly, Gertrude, following a friend’s advice, borrowed $50,000 to invest in an international stock portfolio a year ago.
Based on this information, which of the following personal factors is likely to have the most impact on Gertrude’s risk profile?
(Philippe, age 50, has been a widower for six months. He inherited the money in his wife's pension fund, which he transferred to a LIRA. He also received a $150,000 life insurance benefit. Philippe works for a private firm as an IT analyst and earns $80,000 a year. He would like to retire at age 60.
What income sources will be available to Philippe if he retires at age 60?)
Karine receives $200,000 from her mother's estate and decides to purchase an annuity. Her insurance agent Serge goes over her options with her, and she chooses the annuity that best suits her needs. Serge proceeds with the transaction.
Which of the following statements about the transaction is TRUE?
(Julia deposited capital into an annuity contract that will start payments in three years and continue for 10 years. She is the annuitant; her son Ethan is the beneficiary.
What type of annuity has Julia purchased?)
Lily works for Cloud 9 Inc. She earned $120,000 in Year 1 and $125,000 in Year 2. Lily contributes 5% of her income into a defined contribution pension plan (DCPP), and this contribution is matched by the employer. Lily has unused contribution room of $15,000 and wants to know how much she can contribute to her registered retirement savings plan (RRSP) in Year 2.
Danny purchases a $1,000,000 whole life insurance policy. He names his three daughters, Donna-Joe, Stephanie, and Michelle, as revocable beneficiaries with each receiving one-third of the death benefit.
If Michelle predeceases Danny, and Danny did not have a chance to modify his beneficiary designation, how will Danny’s death benefit be paid out?
Josh is a successful insurance agent with Smart Insurance Inc. who mentors new agents and gives them tips on how to increase their client base. He tells Clarence, a new agent, that he should send an email to close friends and family members to explain the services that he now offers. Clarence is worried about sending unsolicited promotional emails because Firash, the compliance manager, had told him that the practice is not allowed. What legislation was Firash correctly referencing?
The primary and secondary beneficiaries of Rachel and Chad’s joint first-to-die permanent life insurance policy are each other and their adult children, respectively. Within a year of Rachel and Chad’s divorce, Rachel unexpectedly passes away. The policy beneficiaries remained as originally designated. Whose claim will be paid by the insurer?
Edward and Shirley initiated a whole life insurance application for their daughter Christine when she was 15 years of age. As Christine was a student with limited income at the time, the agent set Edward and Shirley jointly as owning and paying the premiums of this policy. Edward was designated beneficiary. Who is the policyholder?
Jackson, a new life insurance agent, is planning to promote a group insurance plan to small businesses in the area. After some research, he is able to locate a list of small business contact information online. The list contains office hours, phone numbers, as well as the office addresses. He prints off the list and prepares marketing material pertaining to group insurance and mails it to each of the small businesses. Jackson’s business plan is to call the businesses one by one 14 days after the marketing material has been mailed. What should Jackson be aware of to comply with the usual business solicitation practice?
Barry, a life insurance agent, is meeting his client Diane who came to Canada 26 years ago. Diane is turning 60 years old and is considering purchasing a non-registered life annuity to supplement her retirement income. Barry presented the quote to her and it was quickly accepted. During the application process, he recorded Diane’s contact information, used her Social Insurance card to ascertain her identity, and collected a cheque of $120,000 from a joint account. The names written on the cheque were Diane and Geoffrey. Diane explained that this was a joint account with her brother. What should Barry do to comply with FINTRAC’s guidelines regarding ascertaining identity?
Bernadette, a 27-year-old single woman, earns $78,000 annually as a production assistant. She meets with Howard, her insurance agent, to purchase an accidental death and dismemberment insurance contract. Bernadette fills out the application form, the application is accepted, and the effective date is the date of acceptance of the application. Why is the effective date of Bernadette’s policy the same as the date of acceptance?
Last week, at a dinner party, Dario, an insurance agent, met Andrew, a successful businessperson with a net worth of over $10 million. Dario spent the evening following Andrew around, telling him how he could help him manage his finances. The day after the meeting, Dario sent a fruit basket to Andrew's office. Every day since, Dario has been calling and urging Andrew to meet with him and take advantage of his services and insurance products.
Which duties and obligations did Dario break?
Laraine wants to purchase an Individual Variable Insurance Contract (IVIC) because of the death benefit guarantee as she has been ill. She has decided on a segregated fund which has, as its underlying asset, units of a mutual fund that invests in North American common shares. Her insurance agent, Jeffrey, wants her to understand key issues before she completes and signs the application. What should Jeffrey do?
Abishola purchases segregated funds from her insurance agent Bob. Before finalizing the transaction, she tells Bob that she will need the funds in a few months to make a down payment on a condo. Later, when Abishola calls to withdraw her funds, Bob informs her that she will incur a fee for withdrawing her funds prematurely. Abishola complains to Bob, and then to Bob's supervisor, without receiving a satisfactory response. To which organization can Abishola escalate her complaint?
Surjit and Rajbir get married in 2010 and Surjit names Rajbir as the irrevocable beneficiary of his life insurance contract. In 2017, the couple divorces amiably and Surjit meets with his insurance representative, Ivan, to review his plans. Surjit tells Ivan that he would like to keep Rajbir as his beneficiary. What should Ivan counsel his client to do?
Jane took out a $100,000 Term 20 life insurance policy on herself when she got her first baby. She does not work and has no group insurance coverage. Five years later, she got another two newborn babies and needed greater insurance coverage to support her children financially in case of her own death. Jane talked to her insurance agent about having more coverage and, rather than having multiple policies, she decided to have one policy for the total coverage amount. She made an application to the life insurance company to change the coverage from $100,000 to $300,000. She is still in good health and the request for change has been approved. One year later, Jane took her own life after losing her husband in a tragic car accident. Based on the situation, how will the insurance company pay out the claim?
Following the death of her sister Sarah last year, Yesha, the liquidator of Sarah's estate, had been in contact with Sarah’s insurance agent Monique on several occasions to claim the death benefit on Sarah’s life insurance policy.
Yesterday, Yesha noticed that Sarah also had a disability insurance policy with a return of premium option which stated that a portion of the premiums can be reimbursed upon her death. Yesha contacted Monique again and asked her for more details about the disability policy and return of premium option but Monique replied that she could not help her as her firm had destroyed Sarah's files shortly after paying out the death benefit.
Did Sarah’s firm act appropriately?
Josh is an established advisor who specializes in group benefits. He recently hired Bryan as a marketing manager. Bryan will be responsible for advertising and creating a social media platform for Josh's company. Among other things, Bryan is developing a monthly electronic newsletter, which he plans to email to potential and existing clients. However, because this is a brand new initiative, none of the would-be recipients has subscribed to the newsletter or asked to receive any such communication from Josh's company. What law should Josh and Bryan be mindful of before sending their newsletter?
Kalei owns a $250,000 life insurance policy with an accumulated cash surrender value of $75,000. She meets with her insurance agent Pamela to inform her that she quit her job last week. She wants to start an online business and needs $40,000 to fund the inventory and cover her living expenses for a few months. She heard that it was possible to obtain a loan using her policy at a 5% interest rate. Which of the following statements about collateral assignment is CORRECT?
Ten years ago, Albert purchased a life insurance policy and designated his brother Stephen as the sole beneficiary. Albert is single and Stephen is his only family. Albert is a frequent traveler and enjoys doing exotic sports in South Africa. During his trip in South Africa in July 2019, there was a heavy earthquake in the region and a lot of the buildings fell apart. It was reported that Albert could be drinking in one of the restaurants when the disaster happened. His body was not located at that time. The South African government declared the incident as a national disaster. After the incident, Stephen got a letter from the life insurance company indicating Albert’s life insurance was in grace period and a payment was required or it will lapse on August 15, 2019. Two weeks have passedsince the mail arrived and the grace period is over. The policy is now lapsed because Stephen was occupied with Albert’s disappearance. On October 1, 2019, Albert’s body is finally located in one of the building ashes. The coroner’s report indicated he died when the building collapsed. What should Stephen do to handle the life insurance matter?
Mike and Todd are both agents with Superior Insurance Company. Every Friday, they have lunch together at the local pub. One Friday, Mike forgets his wallet, so Todd pays both bills. Mike has a sales appointment that afternoon, where he will be signing a small term life insurance policy on a child. He decides to simply indicate that Todd is the agent of record so that Todd gets the compensation for the sale—an easy way to pay him back for lunch! What practice is Mike engaging in?
Callum is an agent with Neverland Insurance. It was recently discovered that he had been using a tied selling technique to double his sales with each client. Which one of the following organizations will take action against Callum’s conduct?
Marcel is 16 years old and attends a boarding school in Ontario. He is a resident of New Brunswick and lives there with his parents in the summer months. After a recent family death, his father has been reviewing the family's life insurance coverage and suggests that Marcel apply for a policy on himself. He tells his son that he will pay the premium while he remains a student. Since Marcel won't be home for some time, his father asks him to meet with an agent in Ontario to apply for coverage. Which one of the following statements is correct regarding Marcel's application?
Ae-Cha starts working for the manufacturer, Premier Vibe Inc., a company that offers its employees group insurance with Sprout Life Insurance. Ae-Cha meets with Devon, the group insurance representative, and learns that her group plan includes $75,000 of life insurance coverage. Ae-Cha would like to know who designates the beneficiary on the life insurance.
Vasu, an insurance agent, meets with Francine, his new client. Francine wants to purchase a disability insurance policy. Vasu helps her complete the application form. In the process, he collects all the required medical and lifestyle information on his client and wonders what he must do with the information he collected.
Which of the following options is CORRECT?
Julie and Jim have been married for 16 years and decide to divorce. They draw up a list of property that will be partitioned based on the provisions of family patrimony: the family home, the cars, the RRSPs, and the benefits accrued with the RRQ during the marriage. What other items should be added to Julie and Jim's list?
Last week, at a dinner party, Dario, an insurance agent, met Andrew, a successful businessperson with a net worth of over $10 million. Dario spent the evening following Andrew around, telling him how he could help him manage his finances. The day after the meeting, Dario sent a fruit basket to Andrew's office. Every day since, Dario has been calling and urging Andrew to meet with him and take advantage of his services and insurance products.
Which duties and obligations did Dario break?
Patrick, an insurance of persons representative, gives a talk about his work to high school students. He tells them about his previous day’s activities. Which activity is considered ethical misconduct?
A group of high school students visits Jacques, a financial security advisor, as part of Career Day. A student wants to know what an insurance contract is. What will Jacques answer?
Surjit and Rajbir got married in 2010, and Surjit named Rajbir as the irrevocable beneficiary of his life insurance contract. In 2017, the couple divorced amicably, and Surjit met with his insurance representative, Ivan, to review his plans. Surjit tells Ivan that he would like to keep Rajbir as his beneficiary.
What should Ivan counsel his client to do?
Ming-Na is a McGill University graduate interested in pursuing a career as an insurance of persons representative. She wants to know which piece of legislation sets out the definition and role of insurance of persons representatives.
Which of the options below is CORRECT?
Claudie’s mother has been the policyholder and beneficiary of an insurance policy on the life of Claudie since she was five years of age. Claudie is now the mother of a three-month-old boy. Claudie would like for Marc-André, her de facto spouse, to be the beneficiary of the policy. What steps need to be taken in order for this to happen?
The company Xtra is growing. Mr. Trenet, chair of the executive committee, invites his financial security advisor, Noah, to meet with them to underwrite an annuity contract. The treasurer of Xtra offers to invest $2,500,000 of the company’s retained earnings. Before voting on a resolution to designate a policyholder, the treasurer asks Noah if Xtra can be designated as the policyholder instead of Mr. Trenet. What answer should Noah give?
Justin decides to lease the personal vehicle of his friend Simon, who owns a window installation company. They agree on Justin having exclusive use of the vehicle in exchange for some renovations on Simon's house. What type of contract is this?
Jean, who is in business, would like to understand why his segregated funds, which resemble mutual funds, allow this type of asset to be sheltered from creditors. How should Patrice, his financial security advisor, answer?
Financial security advisor Juliette meets Pierre during a business meeting. Pierre gives her the name of a prospect, one of his friends. Juliette wants to start by contacting the prospect by email, then plans to follow up with a phone call to set up an appointment. Why should Juliette cease to proceed in this manner with her prospect?
Alec is sure he sent his insurer his annual life insurance premium payment. The insurer did not receive it, however. The insurer then sent Alec a notice of non-payment of premiums, but Alec had moved in the meantime. Therefore, he never got the notice, even though he had emailed hisfinancial security advisor, Olivier, to inform him of his change of address. Unfortunately, Olivier was on a leave of absence and no one else in the firm took over the file. As a result, the policy lapsed. Alec sent Olivier’s firm several emails to complain, but no one responded. Which organization can Alec turn to?
Samya and Gary, who are both insurance representatives, are having lunch together. Gary has been very successful for several years and proposes a scheme to Samya to get insurance proposals signed for a fictional company they would create together. He believes that this system would make them millionaires in about ten years. Gary advises Samya to keep their conversation a secret. If Samya agrees to Gary’s proposal, what sanctions could she face?
Zaid married Baheya five years ago in Montreal. A year later, Zaid purchased two individual term-life insurance policies, one on his life and the second on Baheya’s life, each with a death benefit of $250,000. The marriage didn't last long, and the couple divorced shortly thereafter. Baheya went on to marry Omar, and the new couple had a baby together, named Darwish.
Last week, Baheya died in a car accident. While settling her estate, Omar discovered that no beneficiary was designated on Baheya’s life insurance policy.
To whom will Baheya’s death benefit be paid?
Insurance of persons advisor Somalia is careful to comply with the standards and regulations when she meets with potential clients. Under no circumstances would she want them to feel aggrieved or not respected. She makes sure to know their rights. Which legislation does Somalia not have to worry about?
Valerie, age 42, recently left her job after 15 years of service. She participated in a defined contribution pension plan and had accumulated benefits amounting to $88,000, eligible for transfer into a registered contract. What must Valerie do with this money?
Concilius has had a whole life (permanent) insurance policy for the past eight years. He decides he no longer wants this policy and stops paying the premiums. The cash value keeps the policy in effect for 28 months, after which it lapses. However, 46 months later, Concilius regrets his decision and applies to reinstate his policy. He is prepared to prove that he still meets the insurability conditions and to pay the overdue premiums plus interest, the cash value used, and the interest. Under what conditions will Concilius’ policy be reinstated?
Paulette earns a modest income working as a delivery driver for FastFlowers Inc. in Quebec. The florist company has over 80 employees, 20 of whom are delivery drivers. The employees benefit from a group short- and long-term disability plan. One morning, while delivering flowers, Paulette's truck is struck by a bus. Paulette is taken to the hospital where a doctor deems that she will be unable to work for at least 4 months. Paulette contacts Jade, the human resources manager, to ask her who will pay her disability benefits.
Which of the following answers is CORRECT?
Sabrina is an insurance representative with an insurance of persons certificate issued by the Autorité des marchés financiers (AMF). Her client, Stephanie, is a Quebec resident who accepted a job with Service Canada, in Ottawa, and purchased a condo there. Stephanie calls Sabrina to explain that her new job requires her to work in Ottawa three days per week, but she is still a Quebec resident; she spends four days a week with her family in Granby, Quebec. Stephanie asks Sabrina if she can buy mortgage insurance from her to help cover the mortgage on her new condo.
What should Sabrina answer her?
Anita is a 50-year-old woman who is thinking of purchasing a $150,000 permanent life insurance policy to pay for the capital gains tax that will be payable on her country home upon her death. She had purchased the home twelve years ago and wants to bequeath the property to her niece when she dies.
Which of the following features about a permanent insurance policy is TRUE?
Antonin and Magali are common-law partners in their thirties. They have two children together: a five-year-old daughter and a two-year-old son. Divorced from ex-wife Vanina, Antonin must pay her $1,500 a month in child support until their 10-year-old son reaches 25 years of age. Antonin is covered under a group life insurance policy equal to one year of his $75,000 annual salary. Magali does not currently earn any income, as she takes care of their two children full-time. Antonin is the sole owner of their residence, which will be fully paid off in 25 years.
What life insurance coverage do Antonin and Magali need in their situation?
Harold is a 66-year-old retired school bus mechanic. He receives $900 a month from his defined benefit pension plan (DBPP). His husband Karl is also retired and receives his own pension benefit. Harold would like to know the minimum monthly pension benefit from his DBPP that Karl will receive upon Harold's death.
Germain is a life insurance agent. This morning, he receives a call from Jason, whose wife, Rosalie owned a $50,000 life insurance policy that she purchased from Germain seven years ago. Jason explains that Rosalie had a heart attack and died last week. Germain promises to help as much as he can.
Konrad is the owner of CrossBoy, a manufacturing company employing over 50 employees. Konrad recently took out a $500,000 loan to expand his business. Terrence works as a sales manager and is responsible for roughly 40% of the company’s revenue. Konrad recognizes the importance of Terrence's contributions to the success of the company. Therefore, in addition to a sizeable basesalary, CrossBoy also pays Terrence regular performance-based bonuses. Konrad understands that if Terrence dies prematurely, CrossBoy would suffer financially. What should he do to protect his company?
Larissa is a 65-year-old retired marketing executive. She is single and has no dependents. Larissa accepted a generous retirement package from her employer five years ago and used her early retirement cash bonus to consolidate her financial affairs. She paid off mortgages on both her principal residence (a condo) and her vacation cottage. The fair market value (FMV) of the real estate increased significantly over the years. She named her sister Natalya as the sole beneficiary of her estate. In addition to the two properties, Larissa's estate includes a registered retirement savings plan (RRSP) and shares of Apple Inc. that she purchased in her tax-free savings account (TFSA) 10 years ago. If Larissa were to pass away today, which of her assets would be fully taxable on her final income tax return?
Three years ago, Douglas purchased a whole life insurance policy with numerous supplementary benefits and riders. Today, he meets with his doctor who informs him that he has late-stage colon cancer and has only a few months to live. Even with surgery, his chances of survival are low. Douglas calls his insurance agent, Penny, to ask her what he should do to obtain a benefit immediately.
Gary owns a $500,000 T-20 life insurance policy with an accidental death rider of $250,000. His estate is named as beneficiary. Gary dies when his car falls into a lake. The autopsy shows that he had a heart attack, which caused his death and led to the accident.
What death benefit amount will the life insurance company pay Gary's estate?
Six years ago, Gerard, aged 28, purchased a life insurance policy.
Gerard just got married to Tanya, and they both want to purchase more insurance. Reviewing Gerard’s policy, Tanya notices that Gerard neglected to mention that he had migraines due to concussions suffered from playing football when he was a teenager. Gerard did not intentionally neglect to mention the migraines as the migraines were never an ongoing issue once he stopped playing football.
Which statement is true?
Lisa owns a busy and successful healthcare company, Health Inc. She started the business right out of nursing school all on her own, but recently has been working as the Chief Operating Officer in an office environment, with very little direct interaction with clients. Most of their sales and therefore profits come from their senior account manager, Leslie.
Because of her financial importance to the business, Lisa would like to place life insurance coverage on Leslie, owned by Health Inc.
In what scenario could Health Inc., as the applicant, take out a life policy on Leslie's life, even though she is not the owner?
Edna is a 62-year-old widow living in Quebec. She meets with Yolanda, her insurance agent. Ednaworked part-time her whole life as a seamstress and has no savings. Her husband Donald had been working as a greeter at the local box store until his death 2 months ago at the age of 67. Since his passing, Edna has been struggling financially. She would like to know which of the following organizations will immediately pay her a benefit?
Elizabeth has a universal life policy and has been diligent in funding it over the last several years. As a part of this, the investment account within the policy has done quite well. Elizabeth met with her financial advisor as she would like a refresher on the benefits of the accumulating fund, as it has been a while since they last discussed this; flexibility with and access to cash flow are important to her as she would like to use this as part of her retirement planning in the future.
What benefits of the accumulating account apply to Elizabeth's situation?
Maeve is an Ontario resident. Fifteen years ago, she purchased a $250,000 whole life insurance policy and named her husband Guillaume as the primary beneficiary and her 4-year-old son Edwin as the contingent beneficiary. Last week, Tasha, Maeve's insurance agent called her to ask if she has had any life changes that would warrant a meeting to review her insurance coverage. Maeve informs her that over the last year she divorced Guillaume and that she is now living with her new boyfriend Eduardo. Tasha asks to meet Maeve to review her beneficiary designation. Who will receive Maeve's death benefit if she dies today?
Axel owns a $150,000 whole life insurance policy with an accumulated cash surrender value (CSV) of $20,000. His monthly premiums are $300, due on the fifth day of each month. Axel misses his November 5 premium payment and then dies a few weeks later, on November 20.
Alana, Meaghan, and Beatrice are equal shareholders of Advanced Tech Inc. They each own 100 shares of the company. Each share is currently worth $5,000. They recently signed a cross-purchase buy-sell agreement that is funded by life insurance. What will happen under this agreement if Alanadies today?
Alex is meeting with his financial advisor, Shannon, to discuss potential life insurance options. Alex's need for insurance will increase gradually over time due to growth on his investment properties. He would like the mortgages and taxable gains paid off if he were to pass away. Shannon recommends a permanent policy, as Alex's need is long-term, and could extend beyond any period of time a term policy would cover. Alex also wants to add an extra coverage onto this policy as he wants to be provided with additional growth over time he needs.
Which rider would work for Alex?
Akeno is a 65-year-old retired accountant. He is divorced and has a 40-year-old son who is financially independent. Thanks to years of diligent savings, Akeno now enjoys a comfortable retirement. In addition to his pension income, he has over $300,000 invested in shares in his non-registered account. He lives in a mortgage-free home valued at $700,000 and owns a cottage valued at $500,000. The mortgage on the cottage is $100,000. Akeno purchased the homes 30 years ago when housing prices were low. It is important to him to donate $100,000 to the Alzheimer's Association when he dies. What is the GREATEST financial risk that would arise in the event of Akeno’s death?
Ten years ago, Anastasia purchased a $125,000 10-year term renewable life insurance policy. Her insurance need has not changed, and she is still in good health. She asks her insurance agent Raphael what she should do.
Gabe and Martine are partners in a successfully run clothing company. They have a current buy-sell agreement in place which outlines how their respective share of the business is to be sold/purchased should one of them, or both of them, pass away. They have come to John, their financial advisor, to help them purchase life insurance as they understand this is the most efficient way to fund this arrangement.
What are some strategies through which the buy-sell agreement could be funded?
John purchased a permanent life insurance policy for his grandson, Richard, when Richard was born 28 years ago. This policy has increased in death benefit over time and holds sizeable cash value. Now that Richard is older, John would like to transfer this policy to him as he now is working and has a family.
What does John need to know about this transfer in relation to tax implication?
Kiril is the sole proprietor of a small gym with five employees. His sales manager, Antoine, is a former Olympic athlete, responsible for generating close to 50% of all revenues for the gym. Thanks to Antoine's popular social media presence, the gym is profitable and growing rapidly. However, Kiril has concerns about the future profitability of his gym should Antoine become ill or injured since the other employees are not local celebrities and would not be able to replace Antoine’s contribution to the business.
Which of the following types of insurance policy would protect the gym if Antoine were unable to work?
Arthur is a 79-year-old long-term care (LTC) policyholder whose daughter, Sheila, visits daily to help him get dressed and prepare meals. Sheila wants him to enter a nursing home because he isunable to dress himself. Though he cannot prepare his own meals, he can still feed himself, and once undressed, he can wash himself, seated in the bathtub.
Is Arthur eligible to receive LTC benefits?
Pat, a 30-year-old youth worker, meets with his life insurance agent to discuss disability insurancecoverage. After a thorough analysis of Pat’s needs, the agent recommends a policy with a $1,500 a month benefit (50% of Pat’s current salary) payable to age 65 after a 31-day waiting period. Pat has put enough money away to cover 6 months’ worth of expenses, if necessary, but he would prefer not to dip into his savings. He applies for the policy, with the expectation that the premium will be $75 a month. He already thinks this is pricey and would not want to pay any more than that. Some time later, underwriting informs the agent that the policy has been approved, but with a 125% premium rating due to Pat being overweight. Which one of the following options would make the most sense to reduce the premium to a level Pat would accept without compromising too much on his coverage?
Dorothy, age 36, is an architect. She runs her own office with the help of two assistants. She owns her own condo, has an active social life, and travels regularly for pleasure. She has a net annual income of approximately $125,000, once all the business, rent, salary, and car expenses have been paid. Dorothy is well aware of the significant financial problems that she would face for any absences from the office due to illness or disability. What are Dorothy’s main protection needs in this respect?
Denise, age 45, is a member of her employer’s group insurance plan, which provides disability protection for 60% of her annual salary of $60,000. Louis, her 42-year-old spouse, is self-employed, has an annual income of $45,000, and no disability protection. As parents of three teenagers, Denise and Louis need $6,000 a month to meet their financial obligations with respect to such expenses as housing, food, car, clothing, and entertainment. Which of the following best characterizes Denise and Louis’ current protection?
The one-year anniversary of Sally’s disability policy is quickly approaching. She recently received a letter in the mail from the insurer outlining the requirements to increase her monthly benefit via the future purchase option she added when she initially got the policy. What is required of Sally to increase her monthly benefit?
Marsha and Alexis are equal partners in an advertising firm. They meet with Jose, an insurance agent, and Horacio, their lawyer, because they would like to protect themselves if one of them becomes disabled and unable to work for an extended period of time. At the end of their meeting, they agree to purchase $500,000 disability insurance policies on each other by each of them paying premiums.
What type of agreement do Marsha and Alexis have?
Patricia is a laboratory technician who normally earns $4,000 a month. A few months ago, she injured her leg rollerblading and was unable to work for four months. Since she owns a disability insurance policy with a residual benefit option, she received $2,400 a month from the insurer. Now that she is recovered, her doctor has cleared her to slowly return to work. Since she cannot work her regular full-time hours, her pay has decreased to $3,000 a month.
How much will she receive from her residual benefit when she returns to work?
Laekyn purchased an individual disability insurance policy 3 years ago from Awah, her insurance agent. Today, Awah receives a call from Laekyn, who says she is hospitalized following a suicide attempt. Laekyn says her doctor diagnosed her with bipolar disorder and expects she will be able to return to work in 3 months.
Will Awah be able to help Laekyn receive disability benefits?
Rowan works for a construction company that employs 40 employees. The company is newly established, and the owners have yet to implement a group insurance policy. Rowan falls off the side of a building and breaks his collar bone. The doctor informs him that he will be unable to work for five months.
Who will pay him disability benefits while he is recuperating?
Pierre-Marc, aged 32, is a dentist with a rich clientele. His income is substantial. Five years ago, he purchased an “any occupation” disability insurance policy. Today he meets with Joseph, his life insurance agent, to determine whether this type of coverage is still adequate. What should Joseph tell him?
Emery is a healthy wife and mother of two who spends her days caring for her children and volunteering at the local food bank. Emery would like to purchase disability insurance coverage because she is worried about how she would be able to take care of her family if she becomes disabled.
What type of disability policy, if any, is likely to be issued to her?
Brian is a machinist. For the past seven years, he’s worked for a company that offers a group benefits plan. Under that plan, the premiums for long-term disability coverage are entirely paid by the employees. Last year, an injury forced Brian to stop working for eight months. After a four-month waiting period, during which he collected Employment Insurance (EI) benefits, Brian received long-term disability (LTD) benefits from the group plan’s insurer. Brian is now preparing his income tax return and wonders about the tax implications of the different benefits he received while on disability. What statement accurately describes the tax treatment of Brian’s EI and LTD benefits?
On February 15, 2015, Donald took out income replacement insurance with an accidental death and dismemberment rider of $50,000 and a critical illness insurance rider of $25,000. The policy wasissued on April 1, 2015. On April 10, 2015, his doctor tells him that the results of a urine analysis carried out at the end of March reveal a serious anomaly and refers him to an emergency urologist. On April 20, Donald is diagnosed with cancer of the right kidney, which is due to be removed on April 26. But, two days before the procedure, Donald dies in a car accident. What benefit amount will the estate receive?
Harper owns a disability insurance policy that will pay her a monthly benefit if she becomes unable to work. At the time she applied for the policy, Harper was a new graduate with an annual income of $60,000, and she qualified for a monthly benefit of $3,000. Instead of taking the maximum benefit, she focused on paying off her student loans and keeping her insurance premiums low. She elected to purchase a monthly benefit of $2,500 and add the future purchase option (FPO) rider for up to $500 a month of additional coverage. Now she is further along in her career, Harper earns $100,000 a year, and she meets with her insurance agent Trish to increase her coverage. Harper would like her new monthly benefit to be $5,000.
Which of the following statements about Harper’s coverage is TRUE?
Kerry is 52 years old and he is purchasing additional coverage on his individual disability income insurance policy using a future purchase option. His income has increased about 35% since he took out the policy four years ago. What is Kerry guaranteed to receive as a result of the rider?
Melanie is a psychologist. She has her own practice and two employees. In her free time, she loves to dance but also enjoys skydiving, which she does three or four times a year. She meets with Sophie, an insurance agent, because she would like to purchase disability insurance. What should Sophie tell her?
Dominic suffers a heart attack on October 1 and dies a little over a month later, on November 7. At the time of his death, he owned a $150,000 critical illness (CI) insurance policy, purchased 10 years earlier. Dominic never failed to pay the $100 monthly premium. When he died, the insurer had not yet issued the benefit payment.
How will the CI benefit be treated?