3.1 Inventorying Individual Life Policies, Riders, Premiums, and Exclusions

CISRO Life competency sub-component 1.2 asks you to assess whether the client's existing coverage still fits the situation you gathered in sub-component 1.1. This independent OpenExamPrep chapter helps learners study that review. You cannot call coverage "enough" or "the wrong product" until you rebuild each in-force individual contract from the policy, not from the client's memory. Clients routinely confuse face amount with cash surrender value, forget a term rider on a whole life chassis, or assume a converted group certificate is still in force.

Ask for paper booklets, insurer portals, the latest annual statement, and a current premium notice. If two documents disagree, the contract schedule and any filed amendment control. Record what the pages say, then later judge appropriateness against income, debts, dependents, and business interests.

Type of policy

Name the chassis: level, increasing, or decreasing term; participating or non-participating whole life; Term-100; universal life; or a specialty such as joint first-to-die or last-to-die. Type drives duration, whether cash value exists, how premiums behave, and how heavy the tax file will be in the next section. A 20-year term that expires when the client is 58 is a different tool than a paid-up whole life contract sitting in a drawer.

Policyholder and life or lives insured

The policyholder (owner) holds the contractual rights: change a revocable beneficiary, assign the policy, take a policy loan, surrender, or allow a lapse. The life insured is the person whose death causes a claim. They are often the same person on family coverage and often different on spousal, key-person, or corporately owned coverage. If a holding company is the owner, the death benefit is a corporate asset. At inventory stage you do not redesign ownership; you refuse to list "Dev" as owner when the named policyholder is Patel Holdings Inc.

Note single life versus joint, first-to-die versus last-to-die, and any additional-insured rider. A spouse or child term rider is easy to miss if you only copy the base face amount from page one.

Beneficiary

Record primary and contingent names, relationship, and whether the designation is revocable or irrevocable. An irrevocable beneficiary generally must consent to a surrender, a policy loan, or a beneficiary change. "Estate" as beneficiary has probate and creditor consequences you flag now, even if you leave redesign to the recommendation stage. A divorced client who never changed an ex-spouse designation is a classic existing-coverage failure.

Face amount

Write the current death benefit, not the original illustration. Universal life death-benefit option 2 (face plus account), paid-up additions, and decreasing term all change what would be paid this month. Compare that number with the mortgage, the capital-needs estimate, and any business loan the policy was meant to cover. A decreasing-term policy issued against a 25-year mortgage may now be far too small if the client refinanced and extended amortization.

Supplementary benefits and riders

List waiver of premium, accidental death or AD&D, guaranteed insurability, children's term, spouse term, accelerated benefits (terminal illness, critical illness, or long-term care where present), and term riders sitting on a permanent chassis. Riders can expire at a stated age while the base policy continues. A waiver that ended at 60 is useless if the client is 61 and still working.

Renewability and convertibility

For term, two clauses decide whether coverage can outlive the current term: renewability (continue at attained-age rates to a maximum age, usually without new evidence) and convertibility (exchange into a permanent product without evidence, to named plans, until a stated age, for a stated amount). A non-renewable, non-convertible 10-year term that ends next April is a scheduled gap, not a permanent solution. Conversion windows are use-it-or-lose-it; an uninsurable client who lets conversion expire has no individual replacement at standard rates.

Premiums: amount and monthly versus yearly

Record the billed premium and the mode. Monthly pre-authorized chequing is convenient, but fractional modes typically include a modal factor, so twelve monthly payments exceed one annual premium. A client who "cannot afford" more coverage may already be paying extra for convenience; switching mode can free cash flow without cutting face amount. Note whether premiums are level, step-rate on renewal, yearly renewable on a universal life cost of insurance, limited-pay, or being offset by participating dividends. Flag automatic premium loan if the insurer is silently stripping cash value to keep a policy from lapsing.

Limitations or exclusions

Read the schedule for suicide and contestability (typically two years under provincial Insurance Acts — confirm the period in the exam e-book), aviation, war, hazardous occupation, residency, and any extra-premium rating. An aviation exclusion that mattered when the client held a recreational licence may be stale — or still material if they still fly. A rated extra premium is part of the true cost of the in-force plan and belongs beside the modal premium.

Worked inventory: Dev Patel

Dev, 44, Ottawa, brings a 20-year renewable and convertible term issued at age 36, $500,000, monthly PAC of $47 versus a quoted $520 if paid yearly, waiver of premium to age 65, a child term rider to each child's age 25, irrevocable spouse beneficiary, and an aviation exclusion from a licence he no longer holds. He also has a $50,000 participating whole life issued in 1999 that his parents own on his life. Until those facts are on one page, you are guessing, not assessing.