- (Topic 2)
Everett is an insurance of persons representative who works exclusively for Moon Life Insurance. He wants to leave the company and become an independent representative. He knows that before he branches out on his own, he needs to ensure he has sufficient liability insurance.
Which of the following statements about his professional liability insurance is CORRECT?
Correct Answer:
B
For an insurance representative such as Everett who intends to transition to an independent role,maintaining adequate professional liability insurance is crucial. According to LLQP guidelines, the requirements for liability insurance coverage mandate that if the policy includes a deductible, it cannot exceed $20,000 per claim. This limit helps ensure that insurance representatives can reasonably cover the deductible amount without facing significant financial hardship in case of a claim.
Regarding the other answer choices:
A liability insurance policy is typically required to have a minimum coverage of $1,000,000 per claim, not $1,500,000.
Professional liability insurance does not cover gross negligence, fraud, or intentional misconduct such as fraud or misappropriation. It is designed to cover errors, omissions, and negligence within the scope of professional duties, provided they are not intentional or fraudulent acts.
Therefore, option B accurately reflects LLQP stipulations regarding the deductible limit on professional liability insurance for insurance representatives.
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- (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)
Mark and Jesse had a joint life insurance policy which they purchased on the advice of their insurance agent, recognizing that if one of them died, the other would need an insurance benefit to pay off their mortgage and for final expenses. Coverage is $450,000. Last week their car went off the road in a snowstorm. Both were declared dead at the scene. The two had named their adult nephew, Louis, as contingent beneficiary. What is the amount of the benefit the insurer will pay Louis?
Correct Answer:
B
Comprehensive and Detailed in Depth Explanation with Exact Extract from Documents and Guides:
A joint life insurance policy can be either "first-to-die" or "last-to-die." TheIFSE Ethics and Professional Practice Course (Common Law)explains that a first-to-die policy pays the death benefit upon the death of the first insured, typically to the surviving insured, while a last-to-die policy pays upon the death of the second insured, often to a contingent beneficiary. Here, the policy??s purpose (to benefit the survivor for mortgage and expenses) suggests a first-to-die structure. However, Mark and Jesse died simultaneously in the crash. In such cases, the policy pays the full benefit to the contingent beneficiary (Louis) as if one death triggered the payout. The coverage is $450,000, not split (A), multiplied (C), or doubled (D). Thus, Louis receives $450,000, making B correct.
References:
IFSE Ethics and Professional Practice Course (Common Law), Module 2: Insurance Contracts, Section on "Joint Life Policies and Simultaneous Death."
- (Topic 2)
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?
Correct Answer:
A
When a beneficiary predeceases the policyholder and no alternate or contingent beneficiary has been named, the portion allocated to the deceased beneficiary is typically redistributed among the surviving beneficiaries. Since Michelle was named as a revocable beneficiary andpredeceased Danny, her one-third share will be divided equally between the remaining two beneficiaries, Donna-Joe and Stephanie.
Thus, Donna-Joe and Stephanie will each receive half of the total death benefit ($500,000 each), as per LLQP guidelines which state that a predeceased beneficiary??s share is typically redistributed among surviving beneficiaries unless otherwise specified.
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- (Topic 2)
Melissa owns a disability insurance policy from Clarity Life. She makes her premium payment on the second day of each month, but this month, she misses the payment deadline. A week passes before she realizes her oversight. She makes a frantic call to Jonathan, a Clarity Life customer service representative. Jonathan explains about notices of termination. Which of the following responses is CORRECT?
Correct Answer:
B
Disability insurance policies generally include a grace period of at least 30 days from the premium due date, during which the policyholder can make a late payment without losing coverage. This grace period ensures that minor payment delays do not immediately result in policy cancellation. Therefore, Melissa??s policy would remain active and would only be subject to cancellation if she fails to pay within 30 days of the missed premium deadline. Notices of termination are issued only after the grace period has lapsed, giving the policyholder additional time to remedy any missed payments.
