LLQP Free Practice Test

- (Topic 5)
(Laurent, age 45, is married with three children. He has no pension plan but contributes to an RRSP. His insurance agent recommends segregated funds but Laurent worries about losing his money if the insurer encounters financial difficulty. What protection should the agent talk about to reassure Laurent?)

1. A. The protection offered by the Canadian Investor Protection Fund.
2. B. The protection offered by the Investor Protection Corporation.
3. C. The protection offered by the Canada Deposit Insurance Corporation.
4. D. The protection offered by Assuris.

Correct Answer: D
Assurisprotects policyholders against the risk of an insurance company failure. Segregated fund contracts are covered by Assuris guarantees, which ensure continuity of benefits up to certain limits.
Exact Extract:
"Assuris is the not-for-profit organization that protects Canadian policyholders if their life insurance company fails. Benefits related to segregated funds are covered up to certain limits."
(Reference:Segfunds-E313-2020-12-7ED, Chapter 2.1.11 Investor Protection)

- (Topic 4)
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?

1. A. The reason is that segregated funds are offered through an annuity policy, and by law, annuities offer a certain measure of protection if the beneficiary is the legal spouse or the policyholder??s ascendant or descendant, or an irrevocable beneficiary
2. B. The reason is that segregated funds are governed by the AMF??s Guideline on Individual Variable Insurance Contracts Relating to Segregated Funds, which states that these products are exempt from seizure
3. C. The reason is that anything offered by a life insurer can be exempt from seizure if a beneficiary is designated, except for contributions in the last year
4. D. The reason is that mutual funds do not offer a guarantee and it??s the guarantee offered by segregated funds, which ensures it is an insurance contract and which therefore allows funds to be free from creditors

Correct Answer: A
Comprehensive and Detailed In-Depth Explanation: Segregated funds are investment products offered by life insurers, combining insurance and investment features. Under Quebec??s Civil Code (Article 2457), proceeds from life insurance contracts, including annuities, are exempt from seizure if the beneficiary is the policyholder??s spouse, ascendant, descendant, or an irrevocable beneficiary. Segregated funds qualify for this protection because they are structured as annuity contracts, distinguishing them from mutual funds. Option A correctly identifies this legal protection tied to beneficiary designation. Option B misattributes the protection to the AMF Guideline, which regulates segregated funds but does not grant seizure exemption—that stems from the Civil Code. Option C overgeneralizes, as not all insurance products are exempt (e.g., recent contributions may be contested under Article 2459). Option D focuses on the guarantee, which is a feature of segregated funds, but the creditor protection hinges on the insurance contract status and beneficiary rules, not the guarantee alone. The Ethics manual requires advisors to explain legal protections accurately.
References: Civil Code of Quebec, Articles 2457–2459; Ethics and Professional Practice
(Civil Law) Manual, Section on Segregated Funds and Creditor Protection.
===========

- (Topic 4)
Maryse, an insurance of persons representative, meets with Anita, an actress, to complete a life insurance proposal. Maryse asks her for proof of age and identity. Anita does not like giving out her personal information and asks Maryse if she really needs to ask for these documents. Under what legislation is Maryse able to ask for these documents?

1. A. i) Charter of Rights and Freedoms and ii) Respecting the distribution of financial products and services (Distribution Act)
2. B. ii) Respecting the distribution of financial products and services (Distribution Act) and iii) Act respecting the protection of personal information in the private sector (APPIPS)
3. C. iii) Act respecting the protection of personal information in the private sector (APPIPS) and iv) Proceeds of Crime (Money Laundering) and Terrorist Financing Act
4. D. iv) Proceeds of Crime (Money Laundering) and Terrorist Financing Act and v) The Insurers Act respecting insurance and the Regulation under the Act respecting insurance

Correct Answer: D
Comprehensive and Detailed In-Depth Explanation: Maryse??s request for proof of age and identity is tied to legal obligations beyond standard insurance practice. The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA, Section 9) mandates financial professionals, including insurance representatives, to verify client identity to prevent money laundering, requiring documents like a birth certificate or driver??s license. The Insurers Act (Section 93) and its Regulation complement this by requiring insurers (and their representatives) to confirm insurability and identity for underwriting accuracy, such as age affecting premiums. Option D correctly identifies these laws. Option A??s Charter (Sections 1–4) protects rights but doesn??t mandate ID collection. Option B??s Distribution Act (Section 16) and APPIPS (Section 10) govern advisor conduct and privacy but don??t specifically require ID for proposals. OptionC??s APPIPS pairing with PCMLTFA is incomplete without insurer-specific rules. The Ethics manual supports compliance with anti- money laundering and insurer requirements.
References: PCMLTFA, Section 9; Insurers Act, Section 93; Ethics and Professional
Practice (Civil Law) Manual, Section on Client Identification.
===========

- (Topic 4)
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?

1. A. Donna-Joe and Stephanie will each receive $500,000.
2. B. Donna-Joe and Stephanie will each receive $333,333, and Michelle's estate will receive $333,333.
3. C. Donna-Joe and Stephanie will each receive $333,333, and Danny's estate will receive $333,333.
4. D. Danny??s estate will receive the entire $1,000,000 death benefit.

Correct Answer: A
When a beneficiary is designated as "revocable" and predeceases the policyholder, their share of the benefit typically reverts to the surviving beneficiaries rather than the deceased beneficiary??s estate. In this case, since Michelle has predeceased Danny, her portion of the benefit is divided equally between Donna-Joe and Stephanie, the remaining beneficiaries. Therefore, each of them would receive 50% of the total death benefit, which is $500,000. If the beneficiaries had been designated as "irrevocable" or if there were specific contingent beneficiaries, different rules might apply.
=================

- (Topic 4)
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?

1. A. An Act respecting the distribution of financial products and services (Distribution Act)
2. B. An Act respecting the protection of personal information in the private sector (APPIPS)
3. C. The Quebec Charter of Human Rights and Freedoms
4. D. The Insurers Act and the Regulation under the Act respecting insurance

Correct Answer: D
Comprehensive and Detailed In-Depth Explanation: Somalia, as an insurance of persons advisor in Quebec, must adhere to multiple legislative frameworks governing her professional conduct and client interactions. The Distribution Act (option A) regulates her licensing, duties, and client dealings as a financial professional (Sections 1–12), making it directly applicable. The APPIPS (option B) governs how she handles clients?? personal information, a critical aspect of her role (Sections 1–10), so she must comply. The Quebec Charter of Human Rights and Freedoms (option C) protects clients?? rights to dignity and respect, influencing her ethical obligations (Sections 1–4). However, The Insurers Act and its Regulation (option D) primarily govern insurance companies?? operations, solvency, and product offerings, not the day-to-day conduct of individual advisors like Somalia (Sections 1–20). While indirectly relevant through her insurer affiliations, it does not impose direct obligations on her client-facing duties. The Ethics and Professional Practice manual stresses advisors?? responsibility to prioritize client-focused legislation, supporting option D as the least applicable.
References: Distribution Act, Sections 1–12; APPIPS, Sections 1–10; Quebec Charter,
Sections 1–4; Insurers Act, Sections 1–20; Ethics and Professional Practice (Civil Law) Manual, Section on Legislative Compliance.
===========