LLQP cheat sheet

Insurable interest must exist at policy issue; it need not continue afterward unless the policy is assigned or a new beneficiary with no insurable interest is named.

Underwriting classifications: standard, preferred (better health/lifestyle), substandard (rated or excluded), and declined; substandard risks may be accepted with a rating, exclusion rider, or lien.

Suicide exclusion typically applies for the first 2 years from issue (or from reinstatement date); misstatement of age or sex is adjusted by benefit amount, not voided after the contestability period.

Contestability period is normally 2 years from issue; after it, the insurer cannot rescind for innocent or negligent misrepresentation, only for fraud proven within the period or material to the claim.

Grace period is typically 30 days; the policy stays in force and unpaid premium is deducted from any claim. Reinstatement usually requires proof of insurability and payment of arrears plus interest within a set window (often 2 years).

Automatic premium loan (APL) uses cash value to pay overdue premium at end of grace period, preventing lapse; it must be elected and creates a policy loan with interest.

Dividend options: cash, reduce premium, accumulate at interest, paid-up additions (PUA), or one-year term. PUAs are the only option that increases both death benefit and cash value.

Non-forfeiture options on lapse: cash surrender, reduced paid-up (lower face, no more premiums), or extended term (same face for a limited term).

Tax treatment in Canada: death benefit is generally tax-free to the beneficiary; the policyholder is taxed on the excess of proceeds over ACB (adjusted cost basis) on disposition or transfer.

Definitions drive claims: 'accident' requires accidental, unintended, and unforeseen cause; 'sickness' requires first manifestation after the effective date and often a waiting period.

Elimination (waiting) period is the time before benefits begin; it reduces claim cost and is separate from the policy's own waiting period before coverage starts.

Benefit periods and maximums: total disability benefit may run to age 65; partial/residual disability pays a proportion based on income loss; indemnity plans pay fixed daily or per-service amounts.

Occupational vs non-occupational coverage: occupational policies cover work-related injury; non-occupational excludes it. Workers' compensation coordination clauses prevent double recovery.

Coordination of benefits (COB): primary plan pays first, secondary pays up to the balance, and total reimbursement cannot exceed 100% of eligible expense.

Pre-existing condition clauses exclude claims arising from conditions diagnosed or treated within a defined look-back period before the effective date.

Disability definitions: 'own occupation' is broader for the insured (pays if unable to do own job), 'any occupation' is stricter; most policies use own occupation for the first 24 months then any occupation.

Renewability classes: non-cancellable (premium and coverage guaranteed), guaranteed renewable (coverage guaranteed, premium can rise by class), and conditionally renewable.

Exclusions commonly include self-inflicted injury, war, normal pregnancy, cosmetic surgery, and injuries sustained while committing a criminal offence.

Segregated fund contracts are individual variable insurance contracts (IVICs) issued by life insurers; they combine mutual-fund-like investments with insurance guarantees.

Guarantees: typically 75% or 100% of deposits at maturity (usually 10 years) and 75% or 100% at death; the guarantee applies to net deposits (after withdrawals), not to market value.

Reset options allow the contract holder to lock in a higher guaranteed value at specified intervals; resets generally extend the maturity date and may carry conditions.

Creditor protection: with an irrevocable beneficiary or a family law designation, segregated fund proceeds can be protected from creditors on bankruptcy, subject to provincial rules and fraud provisions.

Probate avoidance: naming a beneficiary on a segregated fund or annuity means proceeds pass outside the estate, avoiding probate fees and delays.

Segregated fund fees include the MER plus the insurance guarantee fee; they are typically higher than comparable mutual funds.

Annuities: accumulation phase (deposits grow), then payout phase (annuitization). Life annuities can be single or joint, with a guaranteed minimum period.

Deferred annuities grow tax-deferred; non-registered annuity income is partly taxable and partly a return of capital (using the exclusion ratio).

Segregated fund deposits are not guaranteed by the insurer if the insurer becomes insolvent beyond the guarantee; Assuris provides limited protection for policyholders.

Fiduciary duty: the agent must place the client's interests ahead of the agent's compensation and disclose any conflict of interest in writing.

Suitability and needs analysis: recommend products only after assessing financial situation, objectives, risk tolerance, and time horizon; document the rationale.

Know your client (KYC) and know your product (KYP): maintain current KYC information and recommend only products you understand and that fit the client.

Disclosure requirements: identify the insurer, the product, the compensation (commission, trailer fees, bonuses), and any material conflict before the sale.

Privacy and confidentiality: personal information may only be collected, used, and disclosed for identified purposes with consent, per PIPEDA and provincial privacy laws.

Anti-money laundering: report suspicious transactions and large cash transactions; do not tip off the client; keep records for the required retention period.

Marketing and advertising must be accurate, balanced, and not misleading; testimonials require disclosure of any compensation.

Conflicts of interest must be managed or avoided; the agent cannot act as both buyer's and seller's representative without full written disclosure and consent.

Complaint handling: acknowledge complaints promptly, escalate to the insurer and regulator as required, and cooperate with regulatory investigations.