LLQP flashcards
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31 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable Interest
- A legal requirement that the policyholder would suffer financial or emotional loss if the insured died. It must exist at policy issue, not necessarily afterward.
- Contestability Period
- Usually two years from issue. After this period, the insurer cannot rescind a policy for innocent or negligent misrepresentation, though fraud may still void coverage.
- Grace Period
- Typically 30 days after a missed premium during which the policy remains in force. Unpaid premium is deducted from any death benefit paid during that period.
- Automatic Premium Loan
- An elected feature that uses available cash value to pay an overdue premium at the end of the grace period, preventing lapse. It creates a loan with interest.
- Reduced Paid-Up Option
- A non-forfeiture option on lapse that keeps a lower face amount in force with no further premiums due. Cash value funds the reduced coverage.
- Extended Term Option
- A non-forfeiture option that uses cash value to buy term coverage for the same face amount for a limited period, then coverage ends.
- Paid-Up Additions
- A dividend option that buys small amounts of additional permanent coverage. It increases both the death benefit and the cash value of the policy.
- Adjusted Cost Basis
- The policyholder's investment in the contract, used to calculate taxable gain on disposition. The death benefit itself is generally tax-free to beneficiaries.
- Elimination Period
- The waiting period before disability benefits begin after a claim. It reduces claim cost and is separate from any waiting period before coverage starts.
- Own Occupation Definition
- A disability definition that pays if the insured cannot perform the duties of their own specific job. It is broader and more favourable to the insured.
- Any Occupation Definition
- A stricter disability definition that pays only if the insured cannot perform any job for which they are reasonably suited by education, training, or experience.
- Coordination of Benefits
- A rule ensuring total reimbursement does not exceed 100% of eligible expense. The primary plan pays first and the secondary plan pays the balance.
- Pre-Existing Condition
- A condition diagnosed or treated within a defined look-back period before the policy effective date. Claims arising from it are typically excluded.
- Non-Cancellable Policy
- A disability policy where the insurer cannot cancel coverage or raise premiums. Both coverage and premium are guaranteed for the policy term.
- Guaranteed Renewable Policy
- Coverage is guaranteed to renew, but the insurer can raise premiums by class. Individual premium increases are not allowed.
- Residual Disability Benefit
- A partial benefit paid when the insured returns to work but earns less than before disability. It is usually a proportion of the income loss.
- Segregated Fund Contract
- An individual variable insurance contract issued by a life insurer. It combines market-based investments with insurance guarantees on deposits at maturity and death.
- Maturity Guarantee
- Typically 75% or 100% of net deposits returned at the maturity date, often 10 years after the contract start. It applies to deposits, not market value.
- Death Guarantee
- A guarantee that beneficiaries receive at least 75% or 100% of net deposits if the contract holder dies, regardless of market value at that time.
- Reset Option
- A feature allowing the contract holder to lock in a higher guaranteed value at set intervals. Resets typically extend the maturity date.
- Probate Avoidance
- Naming a beneficiary on a segregated fund or annuity means proceeds pass directly to that person, bypassing the estate and probate fees.
- Creditor Protection
- With an irrevocable beneficiary or family law designation, segregated fund proceeds may be shielded from creditors on bankruptcy, subject to provincial rules.
- Accumulation Phase
- The period during which annuity deposits grow tax-deferred before payout begins. It ends when the contract holder elects to annuitize.
- Annuitization
- The conversion of accumulated annuity funds into a stream of regular payments. Payments can be for life, for a fixed term, or a combination.
- Exclusion Ratio
- The portion of each non-registered annuity payment treated as return of capital and therefore not taxable. The remainder is taxed as interest income.
- Fiduciary Duty
- The obligation to act in the client's best interest ahead of the agent's own compensation or interests. Conflicts must be disclosed in writing.
- Suitability Analysis
- An assessment of the client's financial situation, objectives, risk tolerance, and time horizon before recommending a product. The rationale should be documented.
- Know Your Client
- The ongoing process of collecting and updating information about the client's finances, goals, and risk profile to ensure suitable recommendations.
- Conflict of Interest Disclosure
- Written disclosure of any compensation, incentive, or relationship that could bias a recommendation. It must occur before the sale is completed.
- PIPEDA
- Canada's federal privacy law governing how organizations collect, use, and disclose personal information. Consent and identified purposes are required.
- Suspicious Transaction Reporting
- An anti-money-laundering obligation to report unusual transactions to the financial intelligence unit. The client must not be tipped off about the report.