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These are Hard Mode questions from our bank: applied questions with dates, amounts and loan-file facts, the style that costs candidates points on the real test. Answers and worked explanations are shown. All questions are original; they are not real LLQP exam questions.
If Felipe dies, his family needs $60,000 a year after tax; his wife will net $42,000. Assume she receives a CPP survivor's pension of $700 a month and that each of their two children, aged 9 and 12, receives the CPP children's benefit at the 2026 flat rate of $307.81 a month. What is the family's annual shortfall in the first year?
Why: Gap before benefits: $60,000 − $42,000 = $18,000. Subtract the survivor's pension ($700 × 12 = $8,400) and two children's benefits (2 × $307.81 × 12 = $7,387.44): $2,212.56. $5,906.28 counts only one child, $8,984.38 subtracts the children's benefits as monthly amounts, and $9,600.00 ignores them. The children's benefits stop at 18 (or at 25 for students), so the shortfall grows later. Source: Service Canada, 'Canada Pension Plan: Pensions and benefits monthly amounts' (2026 maximums; page modified 29 Sep 2026; as at 12 Oct 2026); Canada Pension Plan Act s. 42(1) 'dependent child'.
Under a share redemption plan, Polar Fabrication Ltd. receives $900,000 on the death of a shareholder, Ines. The policy's adjusted cost basis was $40,000. The company redeems her shares from her estate and elects to pay part of the redemption as a capital dividend. How much can the estate receive free of tax as a capital dividend?
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Why: The company's capital dividend account rises by the proceeds less the policy's ACB: $900,000 − $40,000 = $860,000. If the company elects under s. 83(2), a dividend paid out of that balance is not included in the shareholder's income, so the estate receives it tax-free. The ACB portion is not credited, and nothing halves the credit. Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 89(1) 'capital dividend account' (d) and s. 83(2) (current to 21 Sep 2026; as at 12 Oct 2026).
Mehdi's whole life policy has an automatic premium loan provision. He missed his $2,400 annual premium on two consecutive due dates, and each was paid by an automatic premium loan. Loan interest is 6% a year, compounded annually and added to the loan. Two years after the first missed premium, how much does he owe?
Why: The first loan has run two years: $2,400 × 1.06² = $2,696.64. The second has run one year: $2,400 × 1.06 = $2,544.00. Total owed $5,240.64. $5,393.28 charges two years of interest on both loans, $5,088.00 charges one year on both, and $4,800.00 ignores interest. The automatic loan keeps the policy in force only while the cash value can support the growing debt, and the debt reduces both the cash value and the death benefit. Source: Insurance Act (BC), RSBC 2012, c. 1, s. 42(2)(f)(ii) (loan or advance payment option) (current to 6 Oct 2026); CISRO LLQP Curriculum (May 2015; current as at 12 Oct 2026), Life component 2.1 (non-forfeiture benefits: automatic premium loans); arithmetic on stated terms (as at 12 Oct 2026).
Amara, 44, owns a universal life policy with a $20,000 account value at the start of the policy year. She deposits $3,000 at the start of the year. For simplicity, assume the insurer then deducts a $900 cost of insurance charge and a $120 administration fee, and the remaining balance earns 4% for the year. What is her account value at year-end?
Why: Universal life unbundles deposits, insurance charges, expenses and interest. Balance after charges: $20,000 + $3,000 − $900 − $120 = $21,980; with 4% interest, $21,980 × 1.04 = $22,859.20. $23,920.00 ignores the charges, $22,900.00 credits interest before deducting them, and $21,980.00 leaves out the interest. Real policies deduct charges monthly, but the logic is the same. Source: CISRO LLQP Curriculum (May 2015; current as at 12 Oct 2026), Life component 2.1 (how the three separate parts of a UL policy are unbundled: insurance, investments and expenses); arithmetic on the simplified terms in the stem (as at 12 Oct 2026).
During a policy review, Teresa's agent notices that her 20-year term application gave her age as 35, but her passport shows she was 38. She pays $600 a year for $150,000, based on the age-35 rate of $4.00 per $1,000; the age-38 rate was $4.80. The contract follows the statutory rule. What death benefit does the policy now provide?
Why: Under s. 54(2), the insurance money is adjusted to what the premium actually paid would have bought at the correct age: $600 ÷ $4.80 × $1,000 = $125,000. The rule applies whenever the error is found, not only at a claim. $150,000 ignores the rule, $180,000 adjusts in the wrong direction, and $0 treats the error as a misrepresentation that voids the policy; misstated age is excluded from the misrepresentation rules by s. 52(1)(a). Source: Insurance Act (BC), RSBC 2012, c. 1, s. 52(1)(a) and s. 54(2) (current to 6 Oct 2026); uniform life provisions in the common-law provinces; arithmetic on stated rates (as at 12 Oct 2026).
Ulrich died on 2 March. His brother Tobiah, the sole named beneficiary, survived him but died on 17 March, before the insurer paid the claim. There is no contingent beneficiary, and the designation says nothing about surviving for a set period. Where should the insurer pay the money?
Why: A beneficiary's entitlement arises when the life insured dies; from then the money belongs to the beneficiary and is outside the insured's estate. The redirection rules apply only when a beneficiary predeceases the insured, or when the order of deaths cannot be determined. Tobiah clearly survived by 15 days, so his estate receives the money. Clients who want to avoid this can name a contingent beneficiary with a survivorship condition. Source: Insurance Act (BC), RSBC 2012, c. 1, s. 63(1), s. 65(1) and s. 83 (current to 6 Oct 2026); uniform life provisions in the common-law provinces (as at 12 Oct 2026).