Xavier meets and fills out an application form with Jose, an insurance representative, because he would like to purchase a critical illness insurance policy. When Jose asks Xavier about his alcohol consumption, Xavier admits he regularly drinks 10 beers a day. What is the next step in the application process?
Correct Answer: D
In the insurance application process, when an applicant discloses significant health-related information, such as high alcohol consumption, the insurer typically requires additional information. In Xavier's case, he would need to fill out analcohol consumption questionnaireto provide more detail about his drinking habits. This step helps the insurer assess the risk and decide on policy terms, which may include higher premiums, exclusions, or even denial depending on the details provided. It aligns with the LLQP guidelines, which specify that full disclosure and accurate risk assessment are essential steps in underwriting.
LLQP Exam Question 77
Genevieve and Martin, a couple in their 40s, meet with Melissa, their insurance agent, to help them plan for their retirement. Melissa tells them that they would benefit from opening a spousal registered retirement savings plan (RRSP) given their financial situation and discrepancy in theirincomes. The couple would like to know the benefits of opening a spousal RRSP.
Correct Answer: A
A spousal RRSP is beneficial for couples with differing income levels as it allows for income splitting during retirement. This is advantageous because it enables the higher-income spouse to contribute to the RRSP of the lower-income spouse. When the funds are eventually withdrawn during retirement, they are taxed at the lower- income spouse's rate, potentially reducing the couple's overall tax burden. This aligns with the LLQP guideline on income splitting as a tax minimization strategy. Option B is incorrect because the contributions to a spousal RRSP reduce the contribution room of the contributing spouse, not the recipient. Option C is technically accurate but does not directly address the primary advantage of a spousal RRSP in terms of tax planning, and Option D is correct regarding extending tax benefits but does not directly highlight the immediate benefit of income splitting for the couple.
LLQP Exam Question 78
Emeka, a new insurance agent with Sunrise Insurance, meets with her client, Mosi. After analyzing Mosi's needs, Emeka determines that Mosi's current life insurance coverage with Starlight Insurance is more than sufficient. Nevertheless, she persuades Mosi to cancel his existing coverage and buy a new life insurance policy with Sunrise Insurance. She believes this is a good compromise because Mosi will have the coverage he needs, and the new transaction will pay her a commission. Which of the following offences did Emeka commit?
Correct Answer: B
Twisting involves persuading a client to replace an existing insurance policy with a new one from a different insurer, often to earn a commission, without a clear benefit to the client. Emeka's action of convincing Mosi to cancel his sufficient coverage with Starlight Insurance to purchase a new policy with Sunrise Insurance, primarily for her commission, constitutes twisting. This practice isgenerally considered unethical, as it may not be in the best interest of the client and can lead to unnecessary costs and potential coverage gaps. Churning, on the other hand, usually involves replacing policies within the same company to generate additional commissions, which does not apply here.
LLQP Exam Question 79
(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?)
Correct Answer: B
Facing potential job loss, the priority for Priscilla should bebuilding an emergency fundrather than continuing to invest. Emergency funds provide essential liquidity in the event of unexpected income loss. Exact Extract: "Establishing an emergency fund to cover living expenses during unforeseen circumstances is fundamental before committing to longer-term investments like segregated funds." (Reference:Segfunds-E313-2020-12-7ED, Chapter 1.1.2.5 Liquidity)
LLQP Exam Question 80
Luc is married and the father of two teenagers. His annual salary is $60,000. His wife Marie works part-time with an annual salary of $24,000. The family's monthly expenses are $3,500. Luc and Marie are not members of any group benefit plan. What is the minimum monthly amount of disability insurance coverage that Luc needs to cover his risk of disability?
Correct Answer: B
Comprehensive and Detailed Explanation: Luc earns $60,000/year ($5,000/month), Marie earns $24,000/year ($2,000/month), totaling $7,000/month. Expenses are $3,500/month. If Luc is disabled, Marie's $2,000 leaves a $1,500 shortfall. However, Luc needs $3,500/month to fully replace expenses, assuming Marie's income isn't relied upon (Chapter 2:Insurance to Protect Income). Option A: Insufficient; $1,500 + $2,000 = $3,500 but assumes Marie's income. Option B: Correct; $3,500 ensures full coverage. Option C: Excessive; over-insures. Reference: LLQP Accident and Sickness Insurance Manual, Chapter 2:Insurance to Protect Income.
