LLQP glossary

Terms are grouped alphabetically. For how they are tested, see the module guides: Life Insurance, Accident and Sickness, Segregated Funds and Annuities and Ethics.

A

Accident and Sickness (A&S) insurance

Insurance that pays when the insured is injured or ill: disability income, critical illness, long-term care, health and dental. It is one of the four LLQP modules and the only product module required for both licence types. See the A&S module guide.

Accidental death benefit

A rider that pays an extra amount if the insured dies as a result of an accident, as defined in the contract. Deaths from illness are not covered by this rider.

Adjusted cost basis (ACB)

The tax cost of a life insurance policy. When a policy is surrendered or a loan is taken, the taxable policy gain is the amount received minus the ACB. Do not confuse it with the cash surrender value.

Agent

A licensed person who sells insurance on behalf of one or more insurers. Agents owe duties both to the client (needs-based advice, disclosure) and to the insurer they represent.

Annuitant

In a segregated fund contract, the person whose life determines when the death benefit is paid. In an annuity, the person on whose life the payments depend. The annuitant is not necessarily the contract holder.

Annuity

A contract that converts a sum of money into a series of payments, either for a fixed term (term-certain) or for life. Try the annuity payment calculator.

Annuity due

An annuity whose payments are made at the start of each period. For the same capital and rate, each payment is smaller than for an ordinary annuity paid at the end of the period.

Any-occupation definition

A definition of disability under which benefits are paid only if the insured cannot work in any occupation suited to their education, training and experience. Stricter than own-occupation.

Assignment

The transfer of some or all rights under a policy to another person, for example to a lender as security for a loan (collateral assignment). An irrevocable beneficiary's consent may be needed.

B

Beneficiary

The person or entity named to receive the death benefit. Naming a beneficiary usually lets the proceeds pass outside the estate.

Benefit period

How long disability benefits are paid once they start. Not to be confused with the elimination period, which is the wait before they start.

Buy-sell agreement

An agreement among business owners on what happens to an owner's shares at death or disability. Life or disability insurance is often used to fund the purchase.

C

Cash surrender value (CSV)

The amount the policy owner receives on cancelling a policy that has built up cash value, after any surrender charges and loans. The gain over the adjusted cost basis is taxable.

CISRO

The Canadian Insurance Services Regulatory Organizations, which harmonizes the LLQP nationally: curriculum, sample questions and the examination administration policy, including the rewrite rules. See the retake rules.

Common law

The legal system used in every province except Québec. The LLQP Ethics module for these provinces is the common-law version, sometimes identified as module 112.

Contestable period

The period, set by provincial insurance law, during which an insurer can challenge a policy for misrepresentation or non-disclosure of material facts.

Contingent owner

A person named to become owner of the policy if the current owner dies before the life insured. Read exam questions carefully: some documents use successor owner for the same role.

Contract holder

The owner of a segregated fund contract, who makes deposits and withdrawals and names the beneficiary. Different from the annuitant, whose death triggers the death benefit.

Convertibility

A term policy feature that lets the owner exchange it for permanent insurance without new evidence of insurability, within the deadlines stated in the contract.

Cost of insurance (COI)

In universal life, the charge for the pure insurance protection, deducted from the policy account. It can be level or yearly renewable term (increasing each year).

Critical illness insurance

A&S coverage that pays a lump sum if the insured is diagnosed with a covered condition and survives the waiting period set in the contract. The client may use the money as they wish.

D

Death benefit guarantee

In a segregated fund contract, the minimum amount paid to the beneficiary when the annuitant dies, based on deposits and the guarantee level, adjusted for withdrawals and resets.

Deferred annuity

An annuity whose payments begin at a later date, after an accumulation period. Opposite of an immediate annuity.

Disability income insurance

Insurance that replaces part of the insured's income when they cannot work due to illness or injury, according to the contract's definition of disability.

Dividend (participating policy)

A return of part of the premium to owners of participating policies, when the insurer's experience allows it. It is not guaranteed and can be taken in cash or used to buy more coverage.

E

E&O insurance

Errors and omissions insurance, which covers an agent's liability for professional mistakes. Ontario requires at least $1 million per occurrence. See the Ontario guide.

Elimination period

The waiting period between the start of a disability and the first benefit payment. A longer elimination period lowers the premium.

Exclusion

A situation or cause of loss that the policy does not cover, stated in the contract. Exam questions often test whether a claim falls inside or outside an exclusion.

G

Grace period

The time after a premium due date during which the policy stays in force even though the premium is unpaid. Its length is set by the contract and provincial law.

Group insurance

Insurance under one master contract held by an employer or association, covering members. Coverage usually depends on membership, so it can end when employment ends.

Guaranteed insurability rider

A rider allowing the owner to buy more coverage at set dates or events without new medical evidence.

Guaranteed renewable

A contract the insurer must renew if premiums are paid, but whose premiums can change for a whole class of insureds. Compare non-cancellable.

I

Immediate annuity

An annuity bought with a single payment whose income starts at once, typically one period after purchase.

Information folder

The disclosure document for a segregated fund contract, describing guarantees, fees, resets and how withdrawals affect the guarantees.

Irrevocable beneficiary

A beneficiary who cannot be changed, and whose rights cannot be reduced, without their written consent. Compare revocable beneficiary.

J

Joint and last survivor annuity

An annuity that pays until the second of two annuitants dies. Payments are lower than on a single-life annuity for the same capital.

K

Key person insurance

Life or disability coverage owned by a business on an employee or owner whose loss would harm the business financially. The business is usually owner and beneficiary.

Know your client (KYC)

The agent's duty to gather enough information about the client's situation, needs and objectives before making a recommendation.

L

Life insured

The person whose death triggers payment of a life policy. Often, but not always, the same person as the policy owner.

LLQP

The Life Licence Qualification Program: the course and four exams required for a life licence outside Québec. Full details in the LLQP exam guide.

Long-term care insurance

A&S coverage that pays benefits when the insured needs ongoing help with daily activities or supervision, at home or in a facility.

M

Material fact

A fact that would influence the insurer's decision to accept the risk or set the premium. The applicant must disclose it; the agent must not help conceal it.

Maturity guarantee

In a segregated fund contract, the minimum value the contract holder receives at the maturity date, based on deposits and the guarantee level, adjusted for withdrawals and resets.

Misrepresentation

A false or misleading statement in an application. Compare non-disclosure, which is leaving out a material fact. Either can let the insurer contest the policy.

N

Needs analysis

The process of measuring how much coverage a client needs. The capital needs method adds income and cash needs and subtracts existing resources. See the needs calculator.

Non-cancellable

A contract that the insurer must renew and whose premiums cannot be increased, up to the age stated. Stronger for the client than guaranteed renewable.

Non-disclosure

Failing to reveal a material fact when applying for insurance. Compare misrepresentation, which is a false statement.

Nonforfeiture options

Choices available when a permanent policy with cash value stops being paid: take the cash value, use it to buy reduced paid-up or extended term insurance, or an automatic premium loan.

O

Own-occupation definition

A definition of disability under which benefits are paid if the insured cannot perform the main duties of their own occupation, even if they could work elsewhere.

P

Pilot question

An unscored question included in each LLQP module to test it for future exams. Each module has 5, mixed in and not identified.

Policy loan

A loan from the insurer secured by the cash value of a permanent policy. A loan above the adjusted cost basis can create a taxable policy gain.

Premium

The amount paid by the policy owner to keep coverage in force.

Proportional reduction

A method by which a withdrawal reduces a segregated fund guarantee by the same percentage as the market value withdrawn. See the guarantee calculator.

R

Reinstatement

Restoring a lapsed policy, usually by paying overdue premiums and providing evidence of insurability within the period allowed by the contract.

Replacement

Replacing an existing policy with a new one. The agent must give the client a written disclosure comparing the two, so the client can see what is lost and gained.

Reset

A segregated fund feature that locks in a higher market value as the new guaranteed amount, typically restarting the maturity period.

Revocable beneficiary

A beneficiary the policy owner can change at any time without consent. The default in most designations.

Rider

An optional addition to a policy that adds or changes coverage, such as waiver of premium or accidental death.

S

Segregated fund

An individual variable insurance contract whose assets are held separately from the insurer's general funds, with maturity and death benefit guarantees. See the Seg Funds module guide.

Sponsorship

An insurer's commitment to support a new agent's licence. Ontario requires a sponsoring insurer for the first two years, and the sponsor starts the application in Licensing Link.

Successor owner

A person named to become the policy owner on the owner's death. Some documents use contingent owner for the same idea; read the question for who takes ownership.

Supervision (new agent)

A period during which a new agent works under an experienced licensee. BC requires at least 24 months; Saskatchewan until 50 placed policies and one year licensed.

T

Term insurance

Life insurance for a set period, such as 10 or 20 years, with no cash value. Premiums rise at renewal. Often renewable and convertible.

Term-certain annuity

An annuity paid for a fixed number of years, whether or not the annuitant is alive. Remaining payments go to the beneficiary or estate.

Term-to-100

Permanent coverage to age 100 with level premiums and little or no cash value. Do not confuse it with whole life, which builds cash value.

U

Underwriting

The insurer's assessment of the risk, using medical, financial and lifestyle information, to accept, rate or decline an application.

Universal life

Permanent insurance combining a cost of insurance with a tax-advantaged investment account, with flexible premiums and a choice of death benefit options.

Utmost good faith

The principle that both parties to an insurance contract must act honestly and disclose material facts. It underlies the rules on misrepresentation and non-disclosure.

W

Waiver of premium

A rider under which the insurer pays the premiums if the insured becomes disabled as defined in the rider.

Whole life insurance

Permanent insurance with level premiums and a guaranteed cash value that grows over time. It can be participating (with dividends) or non-participating.