What should an agent do when a client experiences a major life change?
Review and increase coverage if needed
Life changes often increase financial responsibility — insurance should grow with it.
What is twisting in life insurance?
Replacing a policy with a different company without valid reason.
What is churning in life insurance?
Replacing within the same company for agent commission gain.
Why must a policyholder sign a replacement declaration form?
To protect against twisting and churning.
What is a conversion privilege in group life insurance?
The right to convert group coverage to an individual policy without proof of health, up to a regulatory limit.
What are the two main buy-sell agreement structures?
- Share-redemption plan: The company redeems the deceased owner’s shares.
- Cross-purchase plan: The other owners personally buy the shares from the estate.
What happens when converting a term policy at original age?
Pay a lump-sum ‘catch-up’ for past premiums.
What happens when converting a term policy at attained age?
New rates based on current age; no catch-up required.
When might a participating whole life policy be appropriate?
When the client wants permanent protection plus growth potential via dividends.
What’s the advantage of using riders on a term or whole policy?
Customize coverage affordably instead of buying a separate policy.
When is an accidental death rider suitable?
For clients in higher-risk occupations who need low-cost extra coverage.
What happens when a policy is annuitized?
The cash value buys an annuity.
How is the adjusted cost base (ACB) determined when gifting a policy?
The recipient’s new ACB = the policy’s cash surrender value at transfer.
What tax credit applies when donating a life policy to charity?
A charitable donation tax credit based on the cash surrender value at time of transfer.
How do you calculate taxable gain on a partial withdrawal from a policy?
Pro-rate the ACB: (Withdrawal ÷ Cash Value) × ACB = pro-rated ACB.
How much should an emergency fund cover?
Three to six months of expenses.
How do you calculate the after-tax, after-inflation rate of return?
(1 + after-tax return) ÷ (1 + inflation rate) – 1.
What should an agent do if health changes before policy delivery?
Pause delivery and return to underwriting.
When is policy reinstatement preferable to buying a new one?
If the client’s health hasn’t worsened.
What is the suicide exclusion period in life insurance?
Two years from policy issue.
How is risk evaluated in insurance?
By probability × financial impact.
What determines insurance needs in a one-income household?
The financial dependency of the non-earning spouse and children.
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Introduction to Life Insurance17
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Term Life Insurance44
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Whole Life & T-10039
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Universal Life38
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Riders and Supplementary Benefits35
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Group Life Insurance47
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Taxation of Life Insurance & Tax Strategies40
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Business Life Insurance32
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Application & Underwriting41
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Assessing Needs & Situation29
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Recommending a policy33
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Ongoing Service26
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Formulas18
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Practice Questions22
