LLQP Free Practice Test

- (Topic 5)
(Miles receives a $500,000 inheritance. He wants to invest it in a high-risk segregated fund but is nervous about potential losses.
What unique advantage of segregated funds enables Miles to pursue this strategy?)

1. A. The exemption from probate
2. B. The maturity guarantee
3. C. The ability to reset
4. D. The tax benefit of capital losses

Correct Answer: B
Thematurity guaranteein a segregated fund protects a minimum portion (often 75% or 100%) of the initial investment at maturity, even if high-risk investments underperform. This allows Miles to take risks while having downside protection.
Exact Extract:
"The maturity guarantee protects a minimum portion of the original investment at contract maturity date, even if the underlying investment loses value."
(Reference:Segfunds-E313-2020-12-7ED, Chapter 2.1.1.1 Maturity Guarantee)

- (Topic 3)
France is a daycare owner who has an employer group benefits plan in place for her employees. During her annual renewal meeting with her insurance agent, she is told that the plan??s rates are increasing by a surprisingly large percentage. Her agent explains that although most of her staff are young females in their 20s, the claims experience is higher than the industry norm. What amendment to the group plan could France??s agent suggest to help control the cost?

1. A. Only offer benefits to employees—not their dependants.
2. B. Only cover a class of employees who submit infrequent claims.
3. C. Add deductibles and co-insurance factors to the plan.
4. D. Reduce the benefit offering to make submitting a claim less appealing.

Correct Answer: C
Comprehensive and Detailed Explanation:
Adding deductibles and co-insurance shifts costs to employees, reducing claims and premiums (Chapter 8:Group Plan Specifics).
Option A: Limits coverage scope, not claims. Option B: Discriminatory; impractical.
Option C: Correct; effective cost control. Option D: Reduces value, not optimal.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 8:Group Plan Specifics.

- (Topic 3)
Kevin owns a construction business and wants to take out accident and sickness insurance to protect his income in the event of disability. On his application form, he indicated that he had competed in motocross races over the past five years. What requirements does Kevin need to comply with before the insurer can issue the policy?

1. A. Kevin only needs to answer the medical questions.
2. B. Kevin only needs to specify how often he engages in the sporting activity.
3. C. Kevin needs to complete a special questionnaire, as well as specify how often he engages or intends to engage in the sporting activity in the future.
4. D. Kevin needs to complete a special questionnaire as well as specify how often he engages or intends to engage in the sporting activity in the future; thus, an exclusion rider may be required by the insurer.

Correct Answer: D
Comprehensive and Detailed Explanation:
Motocross is high-risk, requiring a detailed questionnaire and frequency disclosure. Insurers may impose an exclusion rider (Chapter 7:Insurance Recommendation, Contract, and Service Needs).
Option A: Incorrect; misses activity risk. Option B: Incomplete; lacks detail.
Option C: Incomplete; misses exclusion possibility. Option D: Correct; full process with potential rider.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 7:Insurance
Recommendation, Contract, and Service Needs.

- (Topic 3)
Diane is an insurance agent working for Gamma Insurance Inc. who is responsible for coaching a newly licensed agent, Wick. Wick has questions about his role, and he would like to know how he should service his clients.
What should Diane tell Wick about what is expected of him?

1. A. He must keep detailed notes about the services provided to clients.
2. B. He must deliver to clients, newly issued policies within 30 days of acceptance.
3. C. He must fill out the claim forms for his clients.
4. D. He must contact his clients on a quarterly basis.

Correct Answer: A
As an insurance agent,keeping detailed noteson services provided to clients is essential for ensuring compliance, accountability, and providing excellent customer service. Documentation is crucial for record-keeping and allows agents to track interactions and recommendations given to clients. While delivering policies promptly is also part of an agent's duties, maintaining accurate records is fundamental to fulfilling regulatory and ethical obligations as outlined in LLQP guidelines.

- (Topic 5)
Kadiha invested $10,000 in a balanced fund 10 years ago, which she put into a non- registered account. At the time, her insurance agent sold her the fund with a 75% maturity and death benefit guarantee. Today, when the fund expires, the market value is $5,000.
How much will Kadiha receive, and how will her funds be treated for tax purposes?

1. A. $7,500, tax free.
2. B. $7,500, of which $2,500 will be taxed as capital gain.
3. C. $7,500, of which $2,500 will be taxed as interest income.
4. D. $7,500, of which $2,500 will be taxed as interest, dividend, and capital gain.

Correct Answer: A
Kadiha??s investment in a segregated fund with a 75% maturity guarantee means that upon maturity, she is guaranteed to receive 75% of her original investment, which would be $7,500 (75% of $10,000). The payment is considered part of the maturity guarantee under segregated fund contracts, and the difference paid out by the insurer to meet the guarantee ($2,500 in this case) is not subject to capital gains or interest income tax as it??s part of the guaranteed benefit. According to LLQP guidelines, segregated funds with such guarantees only tax the difference as capital gains if the payout exceeds the original investment, which is not applicable here.