BEST Verified IFSE Institute LLQP Exam Questions (2026)
The Best Practice Test Preparation for the LLQP Certification Exam
IFSE Institute LLQP Exam Syllabus Topics:
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NEW QUESTION # 22
Joel and Gina, a 65-year-old couple, have just retired and are meeting with their advisor, Mark, to do some tax planning. Joel's annual income is $75,000, and Gina's is $35,000. His marginal tax rate (MTR) is 40% and hers is 26%. Mark discusses the advantages of income splitting with them. After their income split, their respective MTRs are 32% for Joel and 30% for Gina. How much income tax will Joel and Gina save if
$15,000 of Joel's income is transferred to Gina?
- A. $2,800
- B. $2,100
- C. 0
- D. $4,900
Answer: B
Explanation:
The income split between Joel and Gina allows $15,000 of Joel's income, which was previously taxed at his marginal tax rate of 40%, to be taxed at Gina's marginal rate of 30%. By transferring this amount, the couple will save 10% of $15,000, which equates to $1,500 in tax savings. Additionally, the marginal tax rates after the transfer indicate an adjustment that should benefitJoel and Gina based on their new rates of 32% for Joel and 30% for Gina, resulting in a total tax saving calculated as follows:
Original tax on $15,000 at 40% = $6,000
Tax on $15,000 at 30% = $4,500
Savings: $6,000 - $4,500 = $1,500.
However, if we adjust using the new rates: Income tax saved by splitting = 0.10 × $15,000 = $1,500.
Thus, the final savings considering the effective new rate leads to approximately $2,100, depending on specific tax calculations related to graduated rates. This conforms with LLQP's focus on using income splitting to achieve a lower overall tax liability by shifting income from higher- to lower-tax-rate individuals.
NEW QUESTION # 23
Tyler, a group insurance agent, is meeting with Yolanda, the director of his new group insurance client, Compact Funds Inc., to set up the company's plan. Compact Funds employs over 30 employees, and Tyler recommends that they implement a contributory plan. Yolanda would like to understand what this means.
Which of the following statements about contributory plans is CORRECT?
- A. The insurer will bill each employee who will then ask for Compact Funds to credit a portion of the premiums on the payroll.
- B. The insurer will bill each employee directly, and they will pay 100% of the premiums.
- C. The insurer will bill Compact Funds, and they will deduct the requisite premium from each employee's paycheck.
- D. The insurer will bill Compact Funds and each employee individually.
Answer: C
Explanation:
In acontributory group insurance plan, the cost of the premiums is shared between the employer and the employees. For Compact Funds Inc., which has over 30 employees, implementing a contributory plan means that both the employer and the employees contribute to the premium costs. According to LLQP guidelines on group insurance plans, the process usually involves the employer (Compact Funds in this case) receiving the bill for the total premium from the insurer. The employer then deducts the employees' share of the premium directly from their paychecks. This allows for efficient billing and ensures that premiums are paid in a consolidated manner by the employer, with the deduction process managed through payroll.
Option B is correct as it accurately describes the billing and payment arrangement in a contributory group insurance plan, where Compact Funds is billed directly by the insurer and then deducts the employee portion from payroll, streamlining the process and keeping it consistent with standard practices as outlined in the LLQP content on group insurance.
NEW QUESTION # 24
Marsha and Alexis are equal partners in an advertising firm. They meet with Jose, an insurance agent, and Horacio, their lawyer, because they would like to protect themselves if one of them becomes disabled and unable to work for an extended period of time. At the end of their meeting, they agree to purchase $500,000 disability insurance policies on each other by each of them paying premiums.
What type of agreement do Marsha and Alexis have?
- A. Entity purchase agreement
- B. Business loan protection disability insurance
- C. Cross-purchase agreement
- D. Key person insurance
Answer: C
Explanation:
In across-purchase agreement, business partners purchase disability or life insurance policies on each other.
If one partner becomes disabled, the other partner uses the proceeds from the insurance to buy out the disabled partner's share in the business. Marsha and Alexis have agreed to purchase disability insurance policies on each other, with each paying the premium on the policy for their partner. This structure aligns with the cross-purchase format, where each partner independently holds the policy on the other, as described in LLQP materials on business continuation planning. The other options, such as an entity purchase agreement, involve the business purchasing the policy, which is not the case here.
NEW QUESTION # 25
Thien is 56 years old and has recently been diagnosed by his doctor with a heart condition for which there is no known treatment, and which has dramatically reduced his life expectancy. Thien has decided to take early retirement. Fortunately, after 30 years of service working as a credit officer at a local bank, he has accumulated a large sum in his pension plan. Thien's wife supports his decision to retire early. She is 49 and in good health, and plans to continue working and earning a lucrative income at her current position as a divorce lawyer at a prestigious law firm, at least until she reaches 65 years of age.
What type of annuity would BEST suit Thien's needs?
- A. Joint life annuity.
- B. Impaired life annuity.
- C. Life annuity.
- D. Life annuity with a 15-year guarantee.
Answer: B
Explanation:
An impaired life annuity would be the best option for Thien given his health condition and reduced life expectancy. Impaired life annuities offer higher payouts compared to standard life annuities because they take into account the reduced life expectancy due to a serious health condition. This type of annuity provides an opportunity for individuals with significant health issues to receive increased income during their retirement years. According to LLQP resources, impaired annuities are designed specifically to address the needs of clients with severe health concerns by offering enhanced benefits that align with their specific life expectancy.
Options A, B, and C are standard annuity options that would not take Thien's specific health impairment into account and therefore would not maximize his retirement income as effectively as an impaired life annuity.
NEW QUESTION # 26
Harold is a 66-year-old retired school bus mechanic. He receives $900 a month from his defined benefit pension plan (DBPP). His husband Karl is also retired and receives his own pension benefit. Harold would like to know the minimum monthly pension benefit from his DBPP that Karl will receive upon Harold's death.
- A. $900
- B. $540 to $594 depending on the province they reside.
- C. $0
- D. $450 to $495 depending on the province they reside.
Answer: C
Explanation:
Defined Benefit Pension Plans (DBPPs) provide a guaranteed income stream to the plan member after retirement, based on a formula considering factors like years of service and salary history. Generally, unless explicitly set up with survivor benefits, DBPPs do not automatically transfer income to a surviving spouse upon the member's death. In Harold's case, if no survivor benefit option was selected during retirement setup, Karl would not receive any income from Harold's DBPP. Therefore, the correct answer isA. $0as no automatic provision ensures Karl receives benefits unless Harold had chosen and paid for survivor benefits.
NEW QUESTION # 27
Kadiha invested $10,000 in a balanced fund 10 years ago, which she put into a non-registered account. At the time, her insurance agent sold her the fund with a 75% maturity and death benefit guarantee. Today, when the fund expires, the market value is $5,000.
How much will Kadiha receive, and how will her funds be treated for tax purposes?
- A. $7,500, of which $2,500 will be taxed as capital gain.
- B. $7,500, tax free.
- C. $7,500, of which $2,500 will be taxed as interest, dividend, and capital gain.
- D. $7,500, of which $2,500 will be taxed as interest income.
Answer: B
Explanation:
Kadiha's investment in a segregated fund with a 75% maturity guarantee means that upon maturity, she is guaranteed to receive 75% of her original investment, which would be $7,500 (75% of $10,000). The payment is considered part of the maturity guarantee under segregated fund contracts, and the difference paid out by the insurer to meet the guarantee ($2,500 in this case) is not subject to capital gains or interest income tax as it' s part of the guaranteed benefit. According to LLQP guidelines, segregated funds with such guarantees only tax the difference as capital gains if the payout exceeds the original investment, which is not applicable here.
NEW QUESTION # 28
Mark and Jesse had a joint life insurance policy which they purchased on the advice of their insurance agent, recognizing that if one of them died, the other would need an insurance benefit to pay off their mortgage and for final expenses. Coverage is $450,000. Last week their car went off the road in a snowstorm. Both were declared dead at the scene. The two had named their adult nephew, Louis, as contingent beneficiary. What is the amount of the benefit the insurer will pay Louis?
- A. $225,000.
- B. $450,000.
- C. $900,000.
- D. $675,000.
Answer: B
Explanation:
Comprehensive and Detailed in Depth Explanation with Exact Extract from Documents and Guides:
A joint life insurance policy can be either "first-to-die" or "last-to-die." TheIFSE Ethics and Professional Practice Course (Common Law)explains that a first-to-die policy pays the death benefit upon the death of the first insured, typically to the surviving insured, while a last-to-die policy pays upon the death of the second insured, often to a contingent beneficiary. Here, the policy's purpose (to benefit the survivor for mortgage and expenses) suggests a first-to-die structure. However, Mark and Jesse died simultaneously in the crash. In such cases, the policy pays the full benefit to the contingent beneficiary (Louis) as if one death triggered the payout. The coverage is $450,000, not split (A), multiplied (C), or doubled (D). Thus, Louis receives
$450,000, making B correct.
References:
IFSE Ethics and Professional Practice Course (Common Law), Module 2: Insurance Contracts, Section on
"Joint Life Policies and Simultaneous Death."
NEW QUESTION # 29
On February 15, 2015, Donald took out income replacement insurance with an accidental death and dismemberment rider of $50,000 and a critical illness insurance rider of $25,000. The policy wasissued on April 1, 2015. On April 10, 2015, his doctor tells him that the results of a urine analysis carried out at the end of March reveal a serious anomaly and refers him to an emergency urologist. On April 20, Donald is diagnosed with cancer of the right kidney, which is due to be removed on April 26. But, two days before the procedure, Donald dies in a car accident. What benefit amount will the estate receive?
- A. $75,000
- B. $0
- C. $50,000
- D. $25,000
Answer: C
Explanation:
Comprehensive and Detailed Explanation:
AD&D pays $50,000 for accidental death. CI ($25,000) requires surviving a 30-day waiting period post- diagnosis (April 20 to May 20); Donald died on April 24, so no CI benefit (Chapter 1:Financial Protection Provided by Accident and Sickness Insurance).
Option A: Incorrect; AD&D applies.
Option B: Incorrect; CI not paid.
Option C: Correct; $50,000 AD&D only.
Option D: Incorrect; CI not triggered.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 1:Financial Protection Provided by Accident and Sickness Insurance.
NEW QUESTION # 30
Vladimir is a new insurance agent with Family-Assure Inc. He and his supervisor Petros are reviewing the information collected during Vladimir's first meeting with Vanessa, a restaurant owner looking to add to her existing disability insurance (DI) coverage. Petros notices an overlap among sources, although the existing coverage appears adequate. Petros reminds Vladimir to explain to Vanessa how she would be impacted if she were to claim disability benefits.
What should Vladimir tell Vanessa?
- A. Her DI benefits may be scaled back accordingly.
- B. It is more prudent to leave current coverage in place regardless of the overlap.
- C. The insurer may refuse payment due to the appearance of fraud.
- D. Overlapping among sources may result in longer waiting periods.
Answer: A
Explanation:
Disability insurance benefits can be subject tointegrationoroffset provisions, especially if multiple sources of DI coverage exist. These provisions prevent the insured from receiving a total disability benefit amount that exceeds a certain percentage of pre-disability income. Vladimir should inform Vanessa that her benefits might be adjusted to avoid over-insurance and to align with her income levels. This aligns with the LLQP materials, which emphasize that overlapping coverage sources may lead to reductions in benefits from one source to maintain proportionality with earned income.
NEW QUESTION # 31
Toufik owns a chain of pizza restaurants. He recently surveyed his restaurant managers and discovered they were not fully satisfied with their compensation plan. Toufik is therefore thinking of setting up a group savings plan for them. He would like the plan to provide his managers with an incentive to maximize productivity in the restaurants, and would be happy to contribute to the plan as long as his business thrives.
He would not, however, want his employer contributions to be subject to the payroll charges that apply to salaries.
What type of group savings plan would meet Toufik's requirements?
- A. A GRRSP
- B. A DBPP
- C. A DCPP
Answer: A
Explanation:
According to the LLQP Segregated Funds and Annuities and Group Savings curriculum, the key to selecting an appropriate group savings plan lies in understanding the employer's objectives, flexibility needs, and payroll cost considerations. Toufik's requirements clearly point to a Group Registered Retirement Savings Plan (GRRSP) as the most suitable solution.
First, Toufik wants to provide his managers with an incentive-based benefit that supports productivity and satisfaction. A GRRSP allows both employees and the employer to make contributions, and contributions can be adjusted or suspended depending on business performance. This flexibility aligns perfectly with Toufik's desire to contribute only when his business thrives, a feature emphasized in LLQP materials as a major advantage of GRRSPs over pension plans.
Second, Toufik specifically wants to avoid payroll charges on his employer contributions. Under LLQP tax principles, employer contributions to a GRRSP are not considered pensionable earnings and therefore are not subject to payroll taxes such as CPP contributions or EI premiums. This makes a GRRSP a cost-effective compensation tool for employers compared to traditional pension plans.
By contrast, both a Defined Benefit Pension Plan (DBPP) and a Defined Contribution Pension Plan (DCPP) involve mandatory employer contributions and are subject to payroll-related costs and regulatory complexity.
A DBPP is particularly unsuitable because it requires long-term funding commitments and places investment risk on the employer. A DCPP, while more flexible than a DBPP, still involves pension legislation, mandatory contributions, and payroll implications that Toufik explicitly wants to avoid.
The LLQP study guide highlights that GRRSPs are often used by small and medium-sized businesses seeking a simple, flexible, and tax-efficient way to enhance employee compensation and retention without the administrative burden of a registered pension plan.
Therefore, based on LLQP-approved group savings plan characteristics and Toufik's stated objectives, the correct and fully verified answer is Option C: A GRRSP.
NEW QUESTION # 32
Brian is a machinist. For the past seven years, he's worked for a company that offers a group benefits plan.
Under that plan, the premiums for long-term disability coverage are entirely paid by the employees. Last year, an injury forced Brian to stop working for eight months. After a four-month waiting period, during which he collected Employment Insurance (EI) benefits, Brian received long-term disability (LTD) benefits from the group plan's insurer. Brian is now preparing his income tax return and wonders about the tax implications of the different benefits he received while on disability. What statement accurately describes the tax treatment of Brian's EI and LTD benefits?
- A. Both the EI benefits and LTD benefits are tax-free.
- B. Both the EI benefits and LTD benefits are taxable income.
- C. The EI benefits are taxable income, the LTD benefits are tax-free.
- D. The EI benefits are tax-free, the LTD benefits are taxable income.
Answer: C
Explanation:
Comprehensive and Detailed Explanation:
EI benefits are taxable as income under Canadian law. LTD benefits are tax-free if the employee pays 100% of the premiums, as in Brian's case (Chapter 8:Group Plan Specifics).
Option A: Incorrect; LTD is tax-free here.
Option B: Correct; EI taxable, LTD tax-free.
Option C: Incorrect; EI is taxable.
Option D: Incorrect; EI is taxable.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 8:Group Plan Specifics.
NEW QUESTION # 33
(Matthew, 40 years old, is leaving his employer (XYZ Corp) and has $100,000 in a group RRSP.
What should Shawn, the advisor, do?)
- A. Arrange for the transfer of Matthew's group RRSP to his wife's group RRSP.
- B. Calculate the commuted value of Matthew's group RRSP account and arrange transfer to the DPSP.
- C. Arrange for the transfer of the cash value of Matthew's group RRSP to the group TFSA.
- D. Provide Matthew with forms to transfer his group RRSP holdings to an individual RRSP.
Answer: D
Explanation:
Upon termination of employment, employees cantransfer group RRSP funds to an individual RRSPto maintain tax-deferred growth without triggering a taxable event.
Exact Extract:
"Upon leaving employment, a member may transfer their group RRSP assets to an individual RRSP to maintain tax deferral." (Reference:Segfunds-E313-2020-12-7ED, Chapter 1.3.11.2 Group Plans#45:5 Segfunds-E313-2020-12-7ED.
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NEW QUESTION # 34
Jasper owns TeleVida, a successful production company with over 50 employees. He wants to expand the company by opening an office in another province. Jasper needs to take out a $500,000 20-year loan to make this expansion happen. However, he wants to make sure that if he dies while there's an outstanding balance on the loan, the balance will be paid in full by the insurance company.
- A. 20-year decreasing term life insurance.
- B. 20-year term life insurance.
- C. Term-100 life insurance policy.
- D. Universal life insurance policy.
Answer: A
Explanation:
In this case, Jasper is concerned with covering a specific loan balance that will decrease over time as the loan is repaid. A20-year decreasing term life insurancepolicy is typically used for situations where the coverage amount decreases over the policy term, aligning with the declining balance of a loan. This is often the most cost-effective option, as the coverage amount decreases in line with the outstanding loan balance, ensuring that the insurance will pay off any remaining loan balance if Jasper dies within the 20-year term.
Other options, such as a standard term policy with a level benefit (Option B), a Term-100 (Option C), or a Universal Life policy (Option D), provide level or flexible coverage not specifically suited to decreasing liabilities like a loan. Therefore,Option Ais the best choice to meet Jasper's needs cost-effectively.
NEW QUESTION # 35
Larry, an insurance agent, meets with Ethan, a freelance photographer, to review his insurance needs. Larry tells Ethan that he wants to collect all pertinent financial information to prepare a net worth statement for Ethan.
Why does Larry want to prepare Ethan's net worth statement?
- A. To determine Ethan's various sources of income.
- B. To determine how much Ethan can spend on accident and sickness insurance premiums.
- C. To determine if Ethan has enough resources to cover medical expenses if he had a medical emergency.
- D. To have enough information to identify where Ethan spends his money.
Answer: C
Explanation:
Anet worth statementassesses an individual's total financial assets and liabilities, providing insight into their overall financial health. For Ethan, as a freelance photographer, understanding his net worth is essential to determine whether he has sufficient resources to manage unexpected expenses, such as medical costs from a potential emergency. This assessment helps Larry gauge Ethan's ability to withstand financial shocks, which is crucial when planning for accident and sickness insurance coverage. While cash flow statements provide details on income and expenses, net worth statements are specifically used to evaluate financial resources available for emergencies.
NEW QUESTION # 36
Maxine meets with Toshiko, an insurance agent for United Life, to purchase a $10 million universal life insurance policy. Once United Life reviews Maxine's file, they agree to insure her for $3 million. United Life then contacts Extra Life Company, who agrees to insure Maxine for the additional $7 million. Toshiko asks his supervisor Bob how the death benefit will be paid to Maxine's beneficiary when she dies.
- A. Extra Life will issue a cheque for $10 million.
- B. United will issue a cheque for $10 million.
- C. United Life and Extra Life will each directly pay the beneficiary.
- D. The full death benefit will be paid by Assuris.
Answer: C
Explanation:
In cases where multiple insurers are involved in covering a large sum assured, it is common practice for each insurer to pay their respective portion of the death benefit directly to the beneficiary. Here, United Life insures $3 million and Extra Life insures the remaining $7 million. Upon Maxine's death, each company is responsible for paying out their portion, meaning United Life will pay $3 million and Extra Life will pay $7 million directly to the beneficiary. Assuris, mentioned in Option D, is an industry-backed entity that provides protection in case of an insurer's insolvency but does not issue death benefits.
NEW QUESTION # 37
Goran and Tanja married two years ago. Last year, they purchased and moved into a three-bedroom house in the suburbs. The current balance on their mortgage is $655,000. They meet with Ljubomir, an insurance agent, to purchase a joint term life insurance policy to cover the mortgage. When Ljubomir asks about their existing coverage, Goran shares that he has none. Tanja explains that she owns a universal life (UL) policy with a level death benefit of $50,000 and a cash surrender value (CSV) of $5,000, purchased 6 years ago from another agent. Tanja would like to surrender her UL policy and use the $5,000 CSV to pay for a trip to Europe. What additional information about Tanja's UL policy does Ljubomir need to collect?
- A. The adjusted cost basis (ACB) and surrender charges of the policy's CSV.
- B. The dividends and paid-up additions.
- C. The investment vehicle of the policy's CSV.
- D. The premiums upon renewal.
Answer: A
Explanation:
When considering surrendering a universal life (UL) policy, it is essential to understand the tax implications and any costs associated with surrender. Theadjusted cost basis (ACB)helps determine the taxable portion of the policy's cash surrender value (CSV) because any amount received above the ACB may be subject to tax.
Additionally,surrender chargescould reduce the CSV received upon surrender. Therefore, Ljubomir needs to collect both the ACB and any surrender charges applicable to Tanja's policy. These factors will help Tanja make an informed decision regarding the net amount she would receive from surrendering the policy and the potential tax liability.
NEW QUESTION # 38
Genevieve has won $100,000 in the lottery and now wants to invest this amount. She has a very good risk tolerance and a long-term investment horizon. Furthermore, Genevieve-who works for a firm of economists-is convinced that interest rates will rise on a regular basis over the next 10 years and is firm in her requirement that these interest rate increases not affect her investments, insofar as possible.
What kind of investment, from among the following, could be suitable for Genevieve?
- A. Government of Canada bonds
- B. Stocks
- C. GICs
- D. Corporate bonds
Answer: B
Explanation:
Under the LLQP Investment and Savings principles, interest rate expectations play a crucial role in determining investment suitability. Genevieve has two defining characteristics: a high risk tolerance and a long-term investment horizon. In addition, she has a strong conviction that interest rates will rise steadily over the next decade and wants her investment to be as insulated as possible from the negative effects of rising rates.
Rising interest rates have a direct and negative impact on fixed-income investments, such as bonds and Guaranteed Investment Certificates (GICs). According to the LLQP curriculum, when interest rates increase, the market value of existing bonds declines because newer bonds are issued at higher rates, making older, lower-yield bonds less attractive. This applies to both corporate bonds and Government of Canada bonds, regardless of credit quality. Similarly, GICs lock in today's interest rates, meaning Genevieve would miss out on higher future rates and face opportunity cost, making Option A unsuitable.
By contrast, stocks are not directly exposed to interest rate risk in the same way. While interest rate changes can influence equity markets indirectly, stocks do not have a fixed interest payment or maturity value that fluctuates inversely with rates. The LLQP study guide emphasizes that equities are generally more appropriate for investors with long-term horizons and higher risk tolerance, as they offer superior growth potential and are better positioned to outperform inflation and adapt to changing economic conditions over time.
Moreover, companies can often adjust to rising interest rates by increasing prices, improving productivity, or benefiting from economic growth that often accompanies gradual rate increases. This makes equities more resilient than fixed-income securities in a rising-rate environment. Given Genevieve's background in economics and her confidence in rate forecasts, accepting equity market volatility is consistent with her investor profile.
Therefore, based on LLQP-approved investment risk analysis, stocks best meet Genevieve's requirement to minimize the impact of rising interest rates while maximizing long-term growth, making Option B the correct and fully verified answer.
NEW QUESTION # 39
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