LLQP Life cheat sheet

Insurable interest must exist at the time of application; without it the contract is generally unenforceable. It is not required at the time of death.

Underwriting risk classes, from lowest to highest mortality: preferred, standard, substandard (rated/table-rated), and declined.

Term insurance: pure protection with no cash value. Renewal lets the insured continue past the term; conversion lets the insured move to permanent coverage with no new evidence of insurability, before the stated age or term expiry.

Permanent non-forfeiture options on lapse: cash surrender, reduced paid-up (smaller death benefit, no further premiums), extended term (term coverage for the cash value, same face amount).

Grace period is 30 days in Canada: coverage stays in force, and any unpaid premium is deducted from a death benefit paid during that period.

Reinstatement typically requires application within 2 years, evidence of insurability, and payment of overdue premiums with interest; a new suicide or incontestability period may restart.

Suicide clause: death by suicide is excluded for roughly the first 2 years, during which the insurer refunds premiums paid instead of paying the face amount.

Policy loans reduce both the cash value and the death benefit if unpaid; a disposition of the policy (surrender, lapse with value, death where proceeds are taxable) can trigger taxable income.

Common riders: waiver of premium, guaranteed insurability, accidental death benefit, child term, long-term care, and return of premium.

Renewability ladder: non-cancellable (insurer cannot cancel or raise premiums individually) > guaranteed renewable (cannot cancel, premiums can rise by class) > cancellable (insurer may cancel or raise premiums).

Elimination (waiting) period runs from the date of disability to the start of benefits; benefit period is the maximum duration benefits are payable. Longer elimination periods lower premium.

Two-tier disability definition: 'own occupation' usually applies for the first 24 months, then 'any occupation for which reasonably suited by education, training or experience'.

Residual/partial disability benefits are pro-rated to the percentage of income lost when the insured returns to work part-time.

Recurrent disability: a relapse from the same or related cause within a stated window (commonly 6 months) is treated as continuation of the original claim, with no new elimination period.

Coordination of benefits caps total income (often 60-85% of pre-disability gross earnings) and offsets CPP disability, WSIB and other group benefits.

Taxation rule: benefits are tax-free when the insured paid the premiums; benefits are taxable when the employer paid the premiums and deducted them as a business expense.

AD&D pays a principal sum for accidental death or loss of two limbs/sight, and a capital sum (a stated fraction of the principal sum) for a single loss.

Critical illness insurance pays a lump sum on first diagnosis of a covered condition after a survival period (commonly 30 days); it is not a reimbursement contract.

A segregated fund is an individual variable insurance contract (IVIC) issued by a life insurer: mutual-fund-like investments wrapped in an insurance contract with guarantees.

Two standard guarantees: a maturity guarantee (typically 75% or 100% of deposits, at a 10-year maturity date) and a death benefit guarantee of the same percentage.

The reset feature locks in market gains by raising the guarantee level to the current fund value; resets are limited in frequency and may carry conditions.

Creditor protection applies when the contract has an irrevocable beneficiary who is a spouse, child, parent or grandchild; provincial rules may claw back deposits made within a short window (often 60 days) before bankruptcy.

Segregated fund proceeds paid to a named beneficiary bypass the estate and therefore avoid probate and probate fees.

Cost structure is higher than a comparable mutual fund: the MER plus the insurance/guarantee fee charged by the insurer.

Annuity phases: accumulation (deposits grow) and payout/annuitization (insurer converts capital into income). Payouts depend on age, sex, interest rates and payout option chosen.

Annuity payout options: life only (maximum income, no beneficiary), life with guaranteed term, joint and last survivor, and term certain.

A prescribed annuity on non-registered money levels the taxable portion of each payment so that the taxable amount stays constant in dollar terms and declines as a percentage over time.

Fiduciary duty: act in the client's best interest, put the client ahead of compensation, and disclose or avoid conflicts of interest.

Suitability decision rule: no recommendation until a needs analysis and KYC are documented - objectives, financial situation, risk tolerance, time horizon, knowledge and existing coverage.

Full disclosure required before the sale: premiums, commissions and other compensation, conflicts of interest, product risks, and limitations of the guarantee.

Prohibited market practices include twisting (misleading replacement), churning, coercion, false advertising, and rebating premiums outside permitted rules.

Confidentiality: client information may be disclosed only with client consent or when legally required; PIPEDA governs handling of personal information.

Anti-money laundering: verify client identity, keep records, and report suspicious transactions and large cash transactions to FINTRAC; do not tip off the client.

Licensing is provincial: a licence is required to solicit or negotiate a contract, and a licence is required to share or pay commissions (referral arrangements must be disclosed).

Complaints escalation for life and health insurance generally goes to the insurer, then to the Ombudsman for Life and Health Insurance (OLHI) in participating provinces; errors and omissions insurance covers negligence claims.

Continuing education and reporting changes (address, name, criminal charges) are ongoing licence conditions.