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Welcome

Congratulations to those of you who recently wrote and successfully completed your LLQP Provincial Exam. Welcome to the life insurance business!

For those of you who are preparing for your Advocis and/or Provincial LLQP exams, I thought you might be interested in some recent pass rate statistics for November and December 2009. These statistics compare the success rate of Advocis/Foran students with students enrolled with other LLQP course providers. These results are for first-time writers in Ontario, although there is little variation from province to province.

November 2009: Advocis/Foran: 98%
All other providers: 69%
December 2009: Advocis/Foran: 90%
All other providers: 68%

 According to these statistics, students enrolled in the Advocis/Foran program are doing very well on their exams.

Questions

Here are some questions and answers to help you prepare for your exams. Good luck!

1. This plan is a form of life insurance where the investment component (account value) is separated from the insurance component (i.e. term to 100 policy). Annual premiums cover the policy, with a portion designated for fees and the death benefit, and the excess is credited to the account value, which is the investment account controlled by the policyholder. This is:

  1. whole life insurance
  2. a segregated fund
  3. universal life insurance
  4. a term to 100 policy

2. At age 65, Katherine is ready to retire. She has worked for 35 years with the same employer, and has been a member of her company’s Registered Pension Plan for 28 of those years. Her pension formula is 2%, and is based on the average of her best three years income, which is $85,000. What is her pension?

  1. $51,000
  2. $85,000
  3. $59,500
  4. $47,600

3. Mrs. Doe has a company pension plan (registered pension plan). In 2008, she earned $60,000. Her employer contributed $2,000 to her pension plan, to go with the $1,000 she herself contributed. What is Mrs. Doe’s maximum RRSP limit for 2009?

  1. $10,800
  2. $9,800
  3. $8,800
  4. $7,800

4. In 2004, Sharon purchased life insurance from her good friend, Kim. To reduce Sharon’s premiums, Kim (with Sharon’s knowledge) falsified Sharon’s application by classifying her as a non-smoker, knowing she smoked on a regular basis. If in 2008 Sharon dies of lung cancer and the insurance company becomes aware of what Kim did, what, if any, action can the insurance company take?

  1. No action. The insurance contract is incontestable after a two-year period.
  2. Declare the contract void because Kim and Sharon committed fraud.
  3. No action, since Kim is an agent of the company.
  4. Sue Kim for the amount owing to the beneficiary of Sharon’s plan.

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Answers

1. – c. universal life insurance

Rationale: Universal life insurance is an “unbundled" design policy. The insurance component is separate from the investment component. Policyholders may make choices on the type and amount of insurance they need, and may choose the type and amount of investments they need.

Reference: Advocis Study Guide, Module 2, Life Insurance Products

2. – d. $47,600

Rationale: 2% × $85,000 = $1,700 for each year in RPP

$1,700 x 28 years = $47,600 yearly pension

Reference: Advocis Study Guide, Module 10, Retirement

3. – d. $7,800

Rationale: Mrs. Doe’s contribution limit for 2009 is based on earned income and pension adjustments for the year 2008. Her limit is the lesser of 18% of earned income from 2008 or $21,000 minus a pension adjustment (PA).

Her RRSP calculation is 18% x $60,000 = $10,800

Her pension adjustment (PA) is the total contribution made into her RPP by both Mrs. Doe and her employer in the year 2008, which is $3,000.

Mrs. Doe’s contribution limit = $10,800 – $3,000 = $7,800

Reference: Advocis Study Guide, Module 10, Retirement

4. – b. Declare the contract void because Kim and Sharon committed fraud.

Reference: Advocis Study Guide, Module 7,  Common Law, Contract Law and Life Insurance

Good luck with your studies!

Doug Planche, F.L.M.I., CFP, CLU, CH.F.C.
Senior Vice President
Foran Financial Institute

Doug Planche is the instructor for the Foran LLQP 4-Day Exam Preparation Seminars. For information on the Foran LLQP seminars, please contact Foran Financial Institute at 1-800-565-0374 or visit  www.foranfinancial.com.

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Additional study aids

Preparatory Seminars and Practice Exams

LLQP Prep Seminars – A comprehensive four-day classroom-based seminar intended to prepare you for writing the certification and final licence exams: $545+ taxes
Contact Foran Financial at: 416-947-1922 or 1-800-565-0374.

Please contact Advocis Member Services at 1-877-773-6765 for more details.

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