Life Insurance · Component 2: Analyze the available products (30%)
Universal Life, Riders & Group Life
Universal life's unbundled design, cost of insurance bases, death benefit options, investment risk, withdrawals, loans and the exempt-test deposit limits; the main supplementary benefits and riders; and group life insurance: the master contract, certificates, types of group coverage, underwriting limits, conversion, beneficiary rights and tax treatment.
Analyze the available products·4 min read·6 sections
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Must-know for the exam
✓Universal life separates insurance charges, the investment account and expenses; the owner chooses deposits and accounts and bears investment risk (CISRO Curriculum, Life 2.1).
✓Yearly renewable term charges start low and rise each year; level cost of insurance is fixed at issue and suits long holding periods.
✓Level death benefit: the account forms part of the face, so the net amount at risk falls as the account grows. Face plus account costs more.
✓Exempt policies are not taxed yearly on growth; insurers cap deposits to keep policies exempt (ITA s. 12.2(1); Reg. 306, current to 21 Sep 2026).
✓Waiver of premium pays premiums during total disability after a waiting period, typically six months (industry practice, as at 12 Oct 2026).
✓Terminal illness, critical illness and long-term care benefits differ by trigger: short life expectancy, named diagnosis with survival period, or loss of daily living activities.
✓Guaranteed insurability lets the insured buy more coverage on set dates without evidence; an unused option usually expires.
✓Employer-paid group term life premiums are a taxable benefit (ITA s. 6(4)); employer-paid AD&D premiums are taxable too (s. 6(1)(e.1)); death benefits are tax-free.
✓Group misrepresentation voids only the coverage tied to requested evidence, within two years (Insurance Act (BC) s. 52(3), current to 6 Oct 2026).
✓A replacing group contract within 31 days cannot exclude prior members just for not being at work (Insurance Act (BC) s. 58(4)).
▸On this page · 6 sections
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Traps that cost marks
→Crediting interest on money that has already gone to pay insurance charges.
→Charging the cost of insurance on the full face amount under a level death benefit.
→Confusing what the level and increasing death benefit options pay.
→Judging the two cost bases only on first-year cost.
→Assuming the full group amount can always be converted.
→Treating employer-paid group term life premiums like tax-free health plan premiums.
→Adding scheduled percentages without applying the per-accident maximum.
→Treating an accelerated death benefit as additional to the face amount.
Why it matters on the exam
Universal life items test mechanics (account value, cost of insurance, death benefit options) and suitability (variable income, wealth transfer, investment risk). Rider items ask which benefit fits a stated risk. Group items test conversion, beneficiary rights, underwriting limits and tax.
Universal life mechanics
Choice
Option A
Option B
Cost of insurance
Yearly renewable term: low early, rising every year
Level (T-100): higher early, never rises
Death benefit
Level: face only; net amount at risk shrinks
Face plus account value: rising benefit, higher charges
Loan: debt with interest, disposition to the extent above ACB
CISRO LLQP Curriculum (May 2015; current as at 12 Oct 2026), Life component 2.1; Income Tax Act s. 148(4), 148(9).
Account value each period = previous value + deposits − cost of insurance − fees, plus interest or index credits. A premium holiday works only while the account covers the charges.
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