- (Topic 5)
Larson, an insurance agent, meets with Julia, a real estate agent, to review her insurance needs. Julia has $500 in her savings account and does not own a tax-free savings account (TFSA) or registered retirement savings plan (RRSP). She earns an average of $150,000 a year in sales commissions and rental income from two condo units she owns. The combined value of her income properties is $1,000,000, and the mortgage is $200,000.
Larson recommends that Julia open a TFSA and use it to invest $400 a month in a money market fund.
Which of the following personal risks is Larson trying to mitigate with this advice?
Correct Answer:D
Larson??s recommendation for Julia to open a TFSA and invest in a money market fund is a strategy aimed at building a readily accessible emergency fund. This fund can help mitigate the risk of unforeseen expenses, which is a common financial risk. According to LLQP principles, creating an emergency fund within a TFSA provides tax-free growth and easy access to funds for unexpected costs, such as repairs, medical expenses, or temporary income loss.
Options A, B, and C are incorrect as they relate to specific risks not directly addressed by the creation of an emergency fund. A TFSA primarily provides liquidity for unexpected expenses rather than addressing job loss, bankruptcy, or leveraging.
- (Topic 4)
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?
Correct Answer:B
Comprehensive and Detailed In-Depth Explanation: Under Quebec??s Civil Code, specifically within the framework of family patrimony (Articles 414–426), the partition of property upon divorce includes assets acquired during the marriage that are designated as part of the family patrimony. The family home, cars, RRSPs (Registered Retirement Savings Plans), and benefits accrued under the RRQ (R??gie des rentes du Qu??bec, or Quebec Pension Plan) are already listed, as they are explicitly included under Article 415. However, family patrimony also encompasses other property used for the family??s benefit, such as bank accounts that hold funds accumulated during the marriage for family use. TFSAs (Tax-Free Savings Accounts) are individual savings accounts, but if they were used for family purposes or funded with marital income, they could also be considered. The Ethics and Professional Practice (Civil Law) manual emphasizes thatadvisors must ensure clients fully understand the scope of divisible assets under family patrimony rules to avoid omissions. Life insurance cash surrender values (option C) are not automatically included in family patrimony unless designated for family use, and ??nothing else?? (option D) overlooks additional divisible assets like bank accounts. Option B, ??Bank accounts and TFSAs,?? correctly expands the list to include other relevant marital property, aligning with the Civil Code??s broad interpretation of family patrimony.
References: Civil Code of Quebec, Articles 414–426; Ethics and Professional Practice
(Civil Law) Manual, Section on Family Patrimony.
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- (Topic 4)
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?
Correct Answer:C
Comprehensive and Detailed In-Depth Explanation: An insurance contract under Quebec??s Civil Code (Articles 2389–2414) has distinct characteristics. It is a ??contract of the utmost good faith??(uberrimae fidei), requiring full disclosure from both parties, especially the insured, about material facts (Article 2408). It is typically a ??contract of adhesion,?? as insurers offer standard terms with little negotiation (Article 1379), unlike mutual agreement contracts. It is ??synallagmatic,?? imposing reciprocal obligations—premium payment by the policyholder and coverage by the insurer (Article 1381). It is also ??aleatory,?? as the outcome depends on an uncertain event, like death or loss (Article 2390). Option C accurately reflects these traits. Option A??s ??mutual agreement?? suggests negotiation, which is rare in insurance. Option B and D incorrectly state that inaccurate statements are inconsequential—misrepresentations can void a policy (Article 2410)—and B??s ??consensual?? and D??s ??gratuitous?? misalign with insurance??s onerous nature (payment for coverage). The Ethics and Professional Practice manual emphasizes advisors?? duty to explain these legal characteristics clearly.
References: Civil Code of Quebec, Articles 2389–2414; Ethics and Professional Practice
(Civil Law) Manual, Section on Insurance Contracts.
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- (Topic 3)
Marc, age 35, is a self-employed electrician. His annual income is approximately $60,000. His spouse Veronique works part-time and earns an annual income of $15,000. Marc and Veronique are parents of two young children. Their monthly financial obligations with regard to rent, car, clothing, and food amount to $3,000. What accident and sickness insurance protection do Marc and Veronique primarily need?
Correct Answer:A
Comprehensive and Detailed Explanation:
Marc earns $60,000/year ($5,000/month), and Veronique earns $15,000/year ($1,250/month), totaling $6,250/month. Their expenses are $3,000/month. As the primary earner, Marc??s disability poses the greatest risk (Chapter 6:Client Profile).
If Marc is disabled: Veronique??s $1,250 + $0 = $1,250, short $1,750 of $3,000. If Veronique is disabled: Marc??s $5,000 covers $3,000.
$3,000/month for Marc (60% of his income) plus Veronique??s $1,250 totals $4,250, exceeding $3,000.
Option A: Correct; $3,000/month for Marc ensures expenses are met.
Option B: Incorrect; Veronique??s income is supplementary, not primary. Option C: Excessive; $4,000/month over-insures Marc.
Option D: Incorrect; LTC is for care costs, not income replacement.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 2:Insurance to Protect Income, Chapter 6:Client Profile.
- (Topic 5)
(Jack is starting a new job with group medical, dental, and retirement benefits. He submits his application but is told he is not immediately eligible.
When might Jack become eligible?)
Correct Answer:D
Most group benefits, including medical, dental, and retirement plans, require employees to complete astandard waiting period(e.g., 3 months) before they become eligible for enrollment.
Exact Extract:
"Group insurance plans often impose a standard waiting period before new employees become eligible for coverage."
(Reference:Sickness-E312-2020-12-7ED, Chapter 2.3.3.1 Qualification Period 45:3†Sickness-E312-2020-12-7ED.pdf**)