- (Topic 3)
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?
Correct Answer:D
Comprehensive and Detailed Explanation:
As a self-employed architect, Dorothy needs disability income protection (60% of $125,000 = $75,000/year or $6,250/month) for personal expenses and business overhead expense (BOE) insurance to cover fixed costs (e.g., assistants?? salaries, rent) during disability (Chapter 5:Insurance to Protect Businesses).
Option A: Incomplete; ignores business costs. Option B: Unrealistic; insurers cap at 60-75%. Option C: Incomplete; misses personal income.
Option D: Correct; covers both personal and business needs.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 2:Insurance to Protect Income, Chapter 5:Insurance to Protect Businesses.
- (Topic 2)
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?
Correct Answer:A
Comprehensive and Detailed in Depth Explanation with Exact Extract from Documents and Guides:
TheIFSE Ethics and Professional Practice Course (Common Law)states that a life insurance policy??s coverage remains in effect during the grace period (typically 30 days) if the insured dies before it lapses. Albert died in July 2019 during the earthquake, within the grace period (ending August 15, 2019). The delay in finding his body or issuing the coroner??s report doesn??t negate the claim, as death occurred while the policy was active. Lapse after death (B, C) doesn??t apply, and reinstatement (D) is unnecessary since the
claim is valid based on the death date. Stephen should file a claim, making A correct. References:
IFSE Ethics and Professional Practice Course (Common Law), Module 2: Insurance Contracts, Section on "Grace Period and Claims."
- (Topic 3)
Marvyn meets with his client, Edlyn, a 67-year-old retired widow who wants to purchase long-term care insurance. Edlyn receives monthly benefits from the Canada Pension Plan (CPP), Old Age Security (OAS), and a registered life annuity. She lives in a mortgage-free condo that she would like to bequeath to her son upon her death.
Given this information, which of the following is Edlyn looking to protect by purchasing long- term care insurance?
Correct Answer:B
Edlyn??s primary concern is to preserve her condo asset, which she intends to leave to her son. Long-term care (LTC) insurance can help protect her financial assets by covering the costs associated with long-term care, thus reducing the risk of needing to liquidate assets like her condo to pay for care. The LLQP materials note that LTC insurance is often used to protect assets against the high costs of extended care, particularly for individuals who want to ensure their assets can be transferred to heirs. Therefore, the correct answer is B, as Edlyn is seeking to safeguard her assets from potential erosion due to LTC expenses.
- (Topic 5)
(Vanessa, a grandmother, wants to set up a savings account for her six-month-old granddaughter Brienne??s future education, making a lump sum and regular contributions.
Which account is best suited?)
Correct Answer:C
ARegistered Education Savings Plan (RESP)is specifically designed to fundeducation savingsand allows contributions for a named beneficiary (Brienne), making it the perfect choice.
Exact Extract:
"An RESP is an education savings plan sponsored by the government, providing grants and tax-deferral advantages for beneficiaries saving for post-secondary education." (Reference:Segfunds-E313-2020-12-7ED, Chapter 1.3.11.3 Group Plans and Registered Education Savings Plans)
- (Topic 2)
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 hisinsurance 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?
Correct Answer:B
When a beneficiary is designated as irrevocable, the policyholder cannot make changes to the beneficiary designation or make other policy modifications that impact the irrevocable beneficiary??s rights without their consent. According to LLQP standards, an irrevocable beneficiary has a vested interest in the policy, and any alterations require their permission. In this case, Surjit would need Rajbir??s consent to change or remove her as the beneficiary, regardless of their divorce. This stipulation upholds the binding nature of an irrevocable designation, ensuring that changes can only be made with the beneficiary??s agreement to protect their rights in the policy.