LLQP Life Insurance: In-Force Service

Topic snapshot

Sample questions

These questions are original Securities Prep practice items aligned to this LLQP competency area. They are designed for self-assessment and are not official exam questions.

Question 1

Topic: Provide Customer Service During the Validity Period of the Coverage

Nina, age 49, has had an individually owned universal life policy for 12 years and it has built up cash value. She says she wants to “cancel it and take out the money” because her budget is tight. When explaining what happens if she surrenders the policy, which potential consequence is most specific to surrendering a cash‑value life insurance policy?

• A. A taxable policy gain may be reported if the surrender proceeds exceed the policy’s adjusted cost basis (ACB).
• B. Her premium will automatically increase each year because the cost of insurance rises with age.
• C. She will need to provide evidence of insurability before the insurer will pay out the cash value.
• D. Coverage ends and her beneficiaries would no longer be protected if she dies after the policy terminates.

Best answer: A

What this tests: In-force Service

Explanation: This question tests ongoing service when a client wants to terminate coverage and, specifically, what is unique about surrendering a cash-value policy.

When a client surrenders a permanent policy (such as universal life or whole life) to access cash value, the advisor should explain practical consequences such as:

• The policy will terminate (coverage ends).
• There may be surrender charges or other deductions depending on the policy.
• There may be a taxable policy gain if the amount received is greater than the policy’s adjusted cost basis (ACB).

The distinguishing (“single deciding factor”) attribute here is the potential tax impact of surrendering cash value.

Surrendering a permanent policy with cash value can trigger taxation on any policy gain (proceeds above ACB), which is a key consequence to explain during ongoing service.

Question 2

Topic: Provide Customer Service During the Validity Period of the Coverage

A life insurance policy names the beneficiary as “the insured’s estate.” After the insured dies, which statement best describes the executor’s role and the appropriate way an insurance advisor can help with the claim while staying within scope?

• A. The advisor should submit the claim directly to the insurer on behalf of the estate to avoid delays, since only licensed advisors are permitted to initiate life claims.
• B. The named executor cannot deal with the insurer until probate is completed; the advisor should wait and take no action until a court certificate is issued.
• C. The executor is authorized to act for the estate and can submit the claim; the advisor can help the executor/beneficiaries complete insurer forms and gather required documents, but should not give legal advice or change designations after death.
• D. Any family member can submit the claim because life insurance proceeds bypass the estate; the advisor should instruct the family on how to distribute the funds fairly.

Best answer: C

What this tests: In-force Service

Explanation: When a life insurance policy names the insured’s estate as beneficiary, the death benefit is generally payable to the estate (not directly to individual family members). The executor (called “estate trustee” in some provinces) is the person authorized to act on the estate’s behalf: they gather assets, pay debts/taxes as required, and distribute the remaining estate according to the will.

In a claim situation, an insurance advisor’s role is supportive and administrative:

• explain the insurer’s claim process and what documents are typically requested (e.g., claim form, proof of death, proof of executor authority)
• help the executor/beneficiaries complete forms accurately and submit them to the insurer
• communicate with the insurer to clarify outstanding requirements

The advisor must stay within scope by avoiding legal advice (e.g., interpreting a will, advising who “should” receive money, probate strategy) and by not attempting to change ownership/beneficiaries after the insured’s death.

When proceeds are payable to the estate, the executor (appointed under the will) is the estate’s legal representative for dealing with the insurer. The advisor can support the claim process administratively and explain insurer requirements, while avoiding legal advice or post-death changes.

Question 3

Topic: Provide Customer Service During the Validity Period of the Coverage

A policyowner reviews their life insurance policy and realizes the insured’s date of birth was entered incorrectly on the application, making the insured appear younger than they are. If the error is discovered after the policy is in force, what is the usual contract outcome under the misstatement of age/sex provision?

• A. The insurer adjusts the premium and/or death benefit to what the coverage would have purchased at the insured’s correct age/sex.
• B. The insurer refunds all premiums paid and treats the policy as if it never existed.
• C. The insurer voids the policy automatically because the application contained incorrect information.
• D. The insurer must pay the full stated face amount and cannot make any adjustment once the policy is issued.

Best answer: A

What this tests: In-force Service

Explanation: Most individual life insurance contracts include a misstatement of age/sex provision. If the insured’s age or sex was recorded incorrectly, the insurer does not usually cancel the contract solely for that reason. Instead, the insurer adjusts the policy values so that the premium paid corresponds to the amount of insurance that premium would have bought at the correct age/sex.

From an ongoing service perspective, the advisor should document the client’s notification, submit a change/correction request to the insurer, and keep updated client records (e.g., corrected personal information and insurer confirmation).

Misstatement of age/sex is typically handled by an adjustment, not by cancelling coverage. The policy is recalculated using the correct age/sex so benefits/premiums match what was actually paid.

Question 4

Topic: Provide Customer Service During the Validity Period of the Coverage

Milan’s 20-year term life policy lapsed after he missed premiums beyond the grace period. Six months later, he asks you to “reinstate it today” and mentions he started smoking again and was recently diagnosed with type 2 diabetes. Which statement is most accurate about reinstatement?

• A. Reinstatement restores coverage immediately and retroactively without any interest charges, and health changes since lapse cannot be considered.
• B. Reinstatement is usually only available for a limited period after lapse and typically requires paying overdue premiums (often with interest) plus providing evidence of insurability; approval is not guaranteed.
• C. Because the policy has lapsed, the only way to restore coverage is to apply for a brand-new policy; reinstatement is not a normal option for term insurance.
• D. Once Milan pays the missed premiums, the policy must be reinstated automatically with no underwriting because it was previously issued.

Best answer: B

What this tests: In-force Service

Explanation: Reinstatement is a policy provision that may allow a lapsed policy to be put back in force, but it is not automatic.

At a high level, reinstatement typically involves three elements:

• A limited time window after the policy lapses (set out in the contract)
• Repayment of premiums that were missed (often with interest)
• Evidence of insurability (for example, updated health and lifestyle information, and sometimes medical evidence)

Because reinstatement requires the insurer’s approval based on current insurability, it is not guaranteed—especially when the client reports new risk factors such as returning to smoking or a new diagnosis.

Reinstatement is a contractual privilege with conditions: time limit, repayment of premiums (often with interest), and evidence of insurability. Because Milan’s risk profile has changed, the insurer may decline or re-rate.

Question 5

Topic: Provide Customer Service During the Validity Period of the Coverage

Which policy feature best supports recommending an adjustment after an updated needs analysis shows a client now has a long-term (permanent) insurance need, and the client’s health has declined since the original term policy was issued?

• A. A term conversion privilege that allows conversion to permanent insurance without new evidence of insurability (within the allowed period)
• B. A guaranteed insurability (guaranteed purchase option) rider that allows additional coverage amounts on specified dates or life events without medical evidence
• C. A reinstatement provision that restores a lapsed policy after missed premiums if conditions are met
• D. A waiver of premium rider that keeps premiums paid if the insured becomes disabled

Best answer: A

What this tests: In-force Service

Explanation: When a client’s situation changes during the policy period, an updated needs analysis may support a policy adjustment (for example, converting term to permanent, increasing/decreasing coverage, or adding riders). If the updated analysis shows the need is now long-term and the client’s health has declined, the key issue is insurability: buying a new permanent policy could require medical evidence and may be declined or rated.

A term conversion privilege directly addresses this by allowing the client to convert to a permanent policy within the conversion period, typically without new evidence of insurability. From a service and documentation perspective, the agent should document:

• The change in need (temporary need becoming permanent)
• The client’s constraints (health change/insurability concern)
• Why conversion is suitable compared with alternatives (new application, adding riders, or leaving coverage unchanged)
• Any trade-offs discussed (higher permanent premiums, coverage amount/options available under the conversion rules)

This supports a defensible recommendation based on the updated needs analysis and the policy’s built-in features.

This feature lets the client change from term to permanent coverage during the conversion window, typically without providing new medical evidence—making it well-suited when health has worsened and the need is now permanent.

Question 6

Topic: Provide Customer Service During the Validity Period of the Coverage

Mina owns an individual whole life policy that has been in force for 6 years. Her spouse, who is a revocable beneficiary, calls the insurance advisor asking for the policy’s cash surrender value and whether Mina has missed any premium payments. Mina is travelling and cannot be reached today, but the spouse says it is “urgent.” What is the MOST appropriate response?

• A. Provide the requested details because a beneficiary has an interest in the policy and the matter is urgent.
• B. Confirm only whether premiums are current (but not the cash value), since payment status is not confidential.
• C. Advise the spouse to submit a written request with ID and a copy of the marriage certificate so the advisor can release the details immediately.
• D. Decline to discuss policy details, explain privacy requirements, and offer to contact Mina promptly to obtain consent or have Mina call back to discuss the policy.

Best answer: D

What this tests: In-force Service

Explanation: This scenario tests professional servicing during the policy period, specifically privacy/confidentiality, consent management, and clear communication.

In an individual life insurance policy, the policyowner controls the contract and the insurer/agent must protect the policyowner’s personal information. A spouse who is a revocable beneficiary may expect transparency, but that designation does not by itself authorize disclosure of policy details such as cash value, premium status, loans, or changes.

The best service response is to:

• Explain why details cannot be shared without authorization.
• Offer a practical next step (contact the policyowner promptly, obtain written/verbal consent per insurer process, or have the policyowner call).
• Follow up in a timely manner, documenting the interaction.

This approach balances responsiveness with confidentiality and reduces the risk of an improper disclosure.

The policyowner controls access to policy information. The professional approach is to protect confidentiality, explain the process clearly, and follow up quickly to obtain consent.

Question 7

Topic: Provide Customer Service During the Validity Period of the Coverage

In Canada, which statement correctly describes the tax treatment of a life insurance death benefit and a common settlement option?

• A. Both the death benefit and any interest paid under a settlement option are generally tax-free to the beneficiary.
• B. The death benefit is tax-free only if paid as a lump sum; if the beneficiary chooses an interest settlement option, the full death benefit becomes taxable.
• C. The death benefit is taxable income to the beneficiary, but interest paid under an interest settlement option is tax-free.
• D. The death benefit paid to a named beneficiary is generally received tax-free, but any interest paid under an interest settlement option is taxable to the beneficiary.

Best answer: D

What this tests: In-force Service

Explanation: For basic client service discussions, it helps to separate the death benefit from any earnings after death.

• Death benefit (life insurance proceeds): When an insured person dies and the insurer pays the policy’s death benefit to a properly designated beneficiary, the amount is generally received tax-free by that beneficiary.
• Settlement options: Many policies allow the beneficiary to choose how the insurer pays the proceeds. A lump sum pays the proceeds at once. An interest option (where offered) leaves the proceeds with the insurer and pays interest to the beneficiary (sometimes with access to the principal later).
• Tax on interest: Any interest paid under an interest settlement option is generally taxable to the beneficiary as interest income, because it is growth on the proceeds after death rather than the death benefit itself.

Life insurance death benefits are generally not taxable to the beneficiary, but interest earned after death (such as when proceeds are left on deposit with the insurer and interest is paid) is taxable as interest income.

Question 8

Topic: Provide Customer Service During the Validity Period of the Coverage

Which statement best describes why converting an individual term life insurance policy to a permanent policy may be suitable at renewal time?

• A. It can allow the insured to obtain permanent coverage without new evidence of insurability, and the policy’s death benefit remains generally paid to the beneficiary tax-free.
• B. It keeps the premiums level for the same term length and increases the death benefit automatically each year to offset inflation.
• C. It is typically the lowest-cost option because it allows the client to re-qualify medically and obtain preferred underwriting rates on the existing policy.
• D. It avoids probate and creditor issues automatically because the beneficiary designation becomes irrevocable upon conversion.

Best answer: A

What this tests: In-force Service

Explanation: At term renewal time, a client generally has three broad paths:

• Renew the term policy (continue term coverage, often at higher renewal rates).
• Convert the term policy to a permanent policy (keep coverage long-term, typically without new evidence of insurability, if the policy’s conversion privilege is still available).
• Replace the policy with new coverage (new application and underwriting, which may be cheaper if health is excellent, but carries the risk of being declined or rated).

From a suitability perspective, conversion is most attractive when the client’s need has become permanent (e.g., lifelong dependent, estate liquidity, final expenses) and/or when insurability is a concern. The tax treatment also remains straightforward: life insurance death benefits are generally paid to the beneficiary tax-free, and conversion itself is typically treated as an internal policy change rather than a taxable event at the time of conversion (at an LLQP conceptual level).

Conversion is commonly used when the client’s health may have changed or when the need has become permanent; life insurance death benefits are generally received tax-free by the beneficiary.

Question 9

Topic: Provide Customer Service During the Validity Period of the Coverage

Nina is the beneficiary on her partner’s individual life insurance policy issued 18 months ago. She submits the claim with a death certificate showing death from a heart attack. During the claims review, the insurer notices the application listed “non-smoker” and “no history of heart disease,” but medical records obtained for the claim suggest long-term smoking and prior cardiac treatment.

Which factor is most likely to delay the claim decision?

• A. A policy exclusion for hazardous activities (for example, scuba diving)
• B. A contestability investigation due to potential misrepresentation on the application
• C. A suicide clause that applies in the early policy years
• D. Missing required claim documentation (for example, a death certificate)

Best answer: B

What this tests: In-force Service

Explanation: The deciding attribute is contestability. When a death claim occurs relatively soon after issue and the insurer finds information that appears inconsistent with the application (such as smoking status or medical history), the insurer may conduct a contestability review (an investigation of possible misrepresentation or non-disclosure). This can delay the claim decision while records are gathered and assessed and, depending on findings, may reduce or deny the benefit.

In contrast, missing documentation delays a claim only when required forms (like proof of death) are not provided. Exclusions and suicide clauses affect claims only when the cause of death falls within those specific provisions.

Because the death occurred within the early policy years and new information conflicts with the application, the insurer may investigate for misrepresentation, which can delay and potentially affect the claim outcome.

Question 10

Topic: Provide Customer Service During the Validity Period of the Coverage

Which statement best describes reinstatement of a lapsed individual life insurance policy in Canada?

• A. It is the policyowner’s right to restart coverage at the original premium rate at any time after lapse, without underwriting, as long as premiums resume.
• B. It is an automatic continuation of coverage during the grace period, with no need to repay missed premiums until a claim occurs.
• C. It is the process of restoring a lapsed policy, typically by applying within a limited period, providing evidence of insurability, and repaying overdue premiums (often with interest); approval is not guaranteed.
• D. It is the conversion of term insurance to permanent insurance without evidence of insurability after a policy has lapsed.

Best answer: C

What this tests: In-force Service

Explanation: Reinstatement is an after-lapse service option that may allow a policyowner to restore a life insurance policy that has terminated due to non-payment of premiums. At a high level, reinstatement typically involves:

• Applying within a limited time after lapse (the contract sets the window)
• Providing evidence of insurability (because the insured’s health may have changed)
• Repaying missed premiums and often interest (and possibly other outstanding amounts)

Reinstatement is not guaranteed because the insurer must assess whether the insured remains insurable and whether contractual conditions are met. If reinstatement is declined, the policy generally stays lapsed and the client may need to apply for new coverage (which could be more expensive or unavailable).

Reinstatement generally requires an application within a time limit, proof that the insured is still insurable, and payment of amounts owing. Because the insurer must approve, reinstatement is not automatic.

Continue with full practice

Use the LLQP Life Insurance Practice Test page for the full Securities Prep route, mixed-topic practice, timed mock exams, explanations, and web/mobile app access.

Related focused pages

• Free LLQP Life Insurance Full-Length Practice Exam
• LLQP Life Insurance: Needs Analysis
• LLQP Life Insurance: Product Analysis
• LLQP Life Insurance: Recommendation Implementation

Free review resource

Read the LLQP Life Insurance Study Guide on SecuritiesMastery.com, then return to Securities Prep for timed practice.