Ongoing Service

Question 1

Why is ongoing service important after a life insurance policy is issued?

Answer 1

Because a client’s insurance needs change over time. The agent’s role includes monitoring changes, recommending updates, and ensuring coverage remains appropriate.

Question 2

What are common life events that may trigger a review of insurance needs?

Answer 2

• New dependants
• Marriage
• Divorce
• Employment changes
• New mortgage
• Acquiring a business
• Leaving Canada
• Updated needs analysis

Question 3

How does the arrival of a new dependant affect insurance needs?

Answer 3

Coverage usually increases to provide for the new dependant. A family rider may also be added or extended to cover the child.

Question 4

How does marriage impact life insurance planning?

Answer 4

May require changing beneficiaries and/or increasing coverage if the new spouse is financially dependent.

Question 5

How does divorce impact life insurance?

Answer 5

Beneficiary designations may remain valid (except in Québec, where they are nullified). Settlement agreements may require maintaining coverage for spousal/child support, often with irrevocable designations.

Question 6

What insurance issues can arise with employment changes?

Answer 6

• Group coverage may change or be lost
• Option to convert group coverage to individual coverage
• Higher income may require more coverage
• Job change could improve lifestyle ratings, lowering premiums

Question 7

Why might a new mortgage trigger new life insurance coverage?

Answer 7

To ensure the mortgage can be paid off upon death, reducing financial burden for survivors.

Question 8

Why would a new business acquisition require insurance?

Answer 8

To fund buy-sell agreements, cover key employees, protect against creditors, or secure business loans.

Question 9

What should be checked if a client is leaving Canada?

Answer 9

Whether the policy remains valid, since some policies restrict coverage to Canadian residents or exclude deaths in certain countries.

Question 10

What are two categories of policy amendments?

Answer 10

• Administrative changes (no underwriting)
• Substantive changes (require underwriting)

Question 11

Give examples of changes that do not require underwriting.

Answer 11

• Name/address updates
• Beneficiary changes
• Premium frequency
• Fund choices (UL)
• Payment amount (UL)

Question 12

Give examples of changes that require underwriting.

Answer 12

• Adding a life insured
• Adding riders
• Increasing coverage
• Changing smoking or health status
• Changing death benefit options

Question 13

What is the difference between renewing and replacing a policy?

Answer 13

• Renewal: automatic, no new underwriting, premiums increase with age
• Replacement: new application, possible lower cost if healthy, but resets contestability and suicide clauses

Question 14

What are ‘churning’ and ‘twisting’?

Answer 14

Unethical practices where an agent convinces a client to replace policies for commission.
* Churning: with same insurer
* Twisting: with a different insurer

Question 15

What is the Life Insurance Replacement Declaration (LIRD)?

Answer 15

A disclosure document that must be signed when replacing a policy, outlining reasons, benefits, disadvantages, and ensuring informed consent.

Question 16

Why should clients not cancel an old policy until the new one is in force?

Answer 16

To avoid a gap in coverage if the new policy is delayed or denied.

Question 17

What is the difference between cancelling and surrendering a policy?

Answer 17

• Cancelling: ends coverage (term policies may simply lapse)
• Surrendering: applies to permanent policies; the owner gives up rights and may receive cash value, possibly creating taxable income

Question 18

What is an absolute assignment of a policy?

Answer 18

Full transfer of ownership rights to another person or entity.

Question 19

What is a partial assignment (collateral assignment)?

Answer 19

Policy is used as loan collateral. Lender has first claim to death benefit up to loan balance.

Question 20

What is the life agent’s role in the claims process?

Answer 20

Facilitate paperwork, provide forms, guide beneficiaries through settlement options, and act with sensitivity.

Question 21

What documents are usually required for a claim?

Answer 21

• Claim form
• Proof of death
• Proof of age/gender
• Confirmation of policy status
• Possibly an attending physician’s statement (APS)

Question 22

How does probate affect life insurance proceeds?

Answer 22

If a beneficiary is named, proceeds bypass probate. If the estate is the beneficiary, probate applies (except in MB and QC).

Question 23

What factors can vary the payment upon death?

Answer 23

• Policy type
• Dividends
• Investment returns
• Misstatement of age/gender
• Outstanding loans
• Collateral assignment
• Unpaid premiums

Question 24

How are death benefits taxed?

Answer 24

Generally tax-free for individuals, group plan beneficiaries, and corporations (credited to the CDA for private corporations).

Question 25

What are settlement options besides a lump sum?

Answer 25

Using the death benefit to buy annuities (term certain or life annuities) for structured payments.

Question 26

What is the time requirement for filing a claim?

Answer 26

No strict deadline; claims can be filed years later if the policy was valid. Insurers must pay within 30 days after receiving documents and completing investigations.