LLQP Module 1 – Life Insurance: Everything You Need to Pass

Module 1 is the biggest LLQP module, the most failed module, and the foundation for everything else you’ll do as a licensed advisor. The good news is that the topics that show up most on the exam are also the topics that matter most in real practice.

Key takeaway: Module 1 tests three things heavily: the differences between term, whole life, and universal life, needs analysis math, and the taxation of permanent life insurance. Master those three, and you’ve covered roughly 70 percent of the exam.

What’s Actually on Module 1

Roughly 80 to 85 multiple choice questions, 90 minutes, weighted across:

1. Types of life insurance (~25 percent of the exam)
2. Policy features and provisions (~20 percent)
3. Needs analysis and product selection (~20 percent)
4. Taxation of life insurance (~15 percent)
5. Underwriting and risk classification (~10 percent)
6. Claims, beneficiaries, ownership (~10 percent)

Question style is mostly scenario-based. You’ll get a client situation and four product options. Your job is to pick the right one.

Term Insurance Mastery

Term covers a defined period (10, 20, 25, 30 years, or term-to-100). Pure death benefit, no cash value. It’s the cheapest insurance per dollar of coverage.

Must-know features:

• Renewability (you can renew at the end of the term without re-underwriting, but premiums jump)
• Convertibility (you can convert to permanent without re-underwriting, usually before age 70 or the end of the term)
• Level premiums during the term, then the policy either lapses or premiums increase

Common exam trap: Term-to-100 looks like permanent insurance because it has no expiry, but it has no cash value. It’s essentially permanent-duration term insurance.

Whole Life Mastery

Premiums stay level for life. The death benefit is guaranteed. Cash value is guaranteed, plus dividends in participating policies.

Must-know features:

• Participating vs. non-participating (the par/non-par distinction appears frequently)
• Dividend options (cash, premium reduction, paid-up additions, accumulate at interest, or term insurance)
• Cash value at year one is usually zero or close to zero. It builds steadily after years three to five.
• Policy loans (you can borrow against the cash value, interest accrues, and repayment is optional)

Common exam trap: Don’t confuse the guaranteed cash value column with the projected cash value column on a policy illustration. Guaranteed values are contractually backed. Projected values assume the dividend scale continues.

Universal Life Mastery

The flexible option. You choose the premium (within permitted limits) and the death benefit type.

Must-know features:

• Two death benefit options: level (face amount only) or face amount plus account value
• Cost of insurance can be YRT (yearly renewable term) or level
• Investment account value grows tax-deferred within the policy
• The policy can lapse if the account value is exhausted before insurance costs are covered

Common exam trap: Universal life is not guaranteed in the same way as whole life. The death benefit guarantee depends on how the policy is funded.

Needs Analysis Math

Two methods appear on the exam: capital needs analysis and human life value.

Capital Needs Analysis (DIME):

• Debts
• Income replacement
• Mortgage
• Education

Add them together. Subtract existing coverage and liquid assets. The result is the insurance need.

Human Life Value:

• Annual income minus personal consumption
• Multiply by years until retirement
• Discount to present value using the assumed interest rate

You don’t need to calculate present value perfectly on the exam. You simply need to understand which method fits each scenario.

Taxation of Life Insurance

This is where many Module 1 candidates struggle. Focus on these three rules:

1. Death benefits are tax-free. Always, to the beneficiary, whether the policy is personally or corporately owned.

2. Cash value grows tax-deferred inside the policy (within the prescribed limits set by the Income Tax Act). If you withdraw cash value through a partial surrender, the taxable gain is treated as ordinary income.

3. Corporate-owned life insurance. The death benefit flows through the Capital Dividend Account (CDA). The amount credited to the CDA equals the death benefit minus the policy’s adjusted cost basis (ACB). The CDA balance can then be distributed to shareholders as a tax-free capital dividend.

You’ll see scenario questions asking whether a policy should be owned personally or corporately. In general, the better answer is corporate ownership for business owners with retained earnings, and personal ownership for individuals without a corporation.

Underwriting

Five risk categories you must know:

• Preferred Plus / Preferred (excellent health, non-smoker, minimal risk factors)
• Standard (average health)
• Substandard / Rated (health or lifestyle issues that require an additional premium, often expressed as 150 percent or 200 percent)
• Postponed (the underwriting decision is delayed, usually while awaiting additional information or testing)
• Declined (coverage is not offered)

Underwriting considers four factors: medical history, family history, lifestyle (such as driving record or hobbies), and financial information (including income, debt, and insurable interest).

Beneficiaries

Three designation types:

• Revocable (the owner can change the beneficiary without their consent)
• Irrevocable (changes require the beneficiary’s consent and may provide creditor protection)
• Contingent (receives the benefit if the primary beneficiary dies before the insured)

Quebec follows different rules under the Civil Code, but that’s covered under PQAP rather than the LLQP.

How to Study This Module

1. Read each chapter once.
2. Complete every practice question in your provider’s question bank.
3. Create a one-page summary of the taxation rules. You can’t bring it into the exam, but writing it out reinforces your understanding.
4. Write a full timed practice exam two days before your real exam.
5. Review your incorrect answers, then rest.

FAQ

Is Module 1 the hardest of the four modules?

It’s typically the module with the highest first-attempt failure rate, mainly because candidates write it first while they’re still learning how to study for the LLQP. Once you’ve adapted to the exam style, the material is no more difficult than the other modules.

How many practice questions should I do for Module 1?

Aim for at least 400. If your provider has 200 questions, work through them twice. If there are fewer, go through them three times.

Do I need to know specific insurance company products?

No. The LLQP tests generic product types, not company-specific products.

Are there calculations on the exam?

Yes, but the on-screen calculator handles the calculations. The math is straightforward, mostly multiplication, percentages, and present value calculations. You don’t need to memorize formulas beyond knowing which method applies.

Module 1 looks intimidating because it’s the largest module. Think of it as roughly 70 percent product knowledge and 30 percent taxation, work through the practice questions twice, and you’ll be well prepared to pass.