13.1 Periodic Review: Dependents, Marital Status, Income, Mortgage, New Business, Leaving Canada

Service during the validity period is 10% of the Life paper

This independent OpenExamPrep chapter helps learners study in-force service, replacement, and death claims for the CISRO LLQP Life Insurance module. It is not a regulator manual, not legal or tax advice, and it does not claim official approval from CISRO, CSI, CIPR, or a provincial regulator.

Competency 4 — Provide customer service during the validity period of the coverage — is weighted 10%. Sub-component 4.1 is validate the appropriateness of contract amendment, renewal and termination applications in regards to the client’s situation. The official related contents open with the review/update process: the role of an effective financial planning process to address ongoing needs, including factors that could impact insurance needs, an updated needs analysis, new recommendations including recommended policy changes, and a periodic review cycle. How to execute those changes (amend, replace, assign, lapse, reinstate) is section 13.2 and 13.3. This section is the decision that a change is even warranted.

A policy that was suitable at delivery can be the wrong amount, the wrong chassis, or the wrong beneficiary three years later. The Life exam tests whether you notice that, not whether you can recite a policy number.

The financial planning process does not stop at delivery

Needs analysis in Chapter 4 produced a human-capital / income-replacement number and a capital-needs number, then a recommendation. CISRO 4.1 asks you to repeat that process while the contract is in force. The planning cycle is:

1. Refresh the fact-find (people, money, liabilities, existing cover, residency).
2. Re-run the needs methods with today’s income, debts, and dependents.
3. Compare the new need with what is actually in force (individual, group, government death/survivor benefits from Chapter 3).
4. Recommend keep, amend, convert, add a rider, change a beneficiary or owner, replace (only with replacement disclosure — section 13.2), or terminate/cancel.
5. Document why, and diary the next review.

Periodic review cycle. CISRO lists the cycle as exam content; it does not publish a single national statute that says “every 14 months.” Industry practice is a scheduled review (commonly at least annually, often tied to a statement or renewal) plus an event-driven review whenever a listed factor occurs. Some managing general agencies and insurers also expect a documented annual review on the file. Confirm whatever process the approved e-book describes for your sitting. Missing both the calendar review and the life-event review is how a $400,000 term policy is still sitting on a $1.6 million mortgage.

Dependents

Priya Sandhu, 34, owns $500,000 of 20-year term, bought when she was single and renting. She and her spouse now have a newborn. Capital needs jump: a larger emergency fund, a longer income-replacement horizon, and (if they intend it) an education lump sum. The review is not “sell something.” It is: recalculate, then decide whether to increase this term (new underwriting on the increase), add a term rider or second policy, or convert part of the term to permanent for the lifetime slice (final expenses, a child who will never be independent). If a later review finds the children are grown and self-supporting, the same process can support reducing or not renewing a layer — after you check that estate tax, a remaining spouse, or a special-needs adult has not quietly replaced the old need.

A new dependent who is a minor also triggers beneficiary mechanics from section 12.3: a trustee, a guardian of property, or (in Quebec) a tutor, so the insurer has someone who can give a discharge. That is a 4.1 recommendation even when the face amount does not change.

Marital status

Marriage or a new common-law relationship often increases the income-replacement need and may justify naming the spouse as primary beneficiary. Separation or divorce often requires the opposite file work: the former spouse may still be the revocable beneficiary on a personally owned policy; an irrevocable designation or a court support order can block a change until released. Do not treat “we broke up” as a reason to replace the contract. A beneficiary change on the same policy is usually a service amendment, not a replacement. Replacement is a different legal path (section 13.2).

Dana Okonkwo divorces. She has sole custody of two children. The $750,000 term is still roughly the right income-replacement number, but the former spouse is still named. The 4.1 recommendation is: confirm whether the designation is revocable; if it is, take a new designation naming the children with a trustee; if it is irrevocable or tied to support, get the legal release before you promise a change. Insurable interest in her own life is not lost by divorce.

Employment, income, mortgage, and a new business

A promotion that lifts Priya’s salary from $80,000 to $120,000 increases the human-capital number. The same review must ask whether her employer group life increased, stayed capped (for example 1× or 2× salary with a dollar maximum), or is optional and unenrolled. Group is not a substitute for a personal needs analysis: the sponsor can change or terminate it, and it usually ends when the job ends.

Job loss is a 4.1 event even if the personal term is still the right face. Affordability may require a mode change, a dividend option that reduces the out-of-pocket premium, a conversion of group life within the certificate’s window, or — only after a documented analysis — a non-forfeiture election (section 13.3). Do not let group coverage silently expire because “we will sort it out after the next job.”

A new mortgage is a capital-needs add. A paid-off mortgage is a capital-needs subtract, but only for that debt. Income replacement, final expenses, and tax at death may still be there. Decreasing term that was meant to track the loan should be compared with the current balance, not the original amortization schedule if they refinanced.

A new business owner is the CISRO example that pulls in Chapter 5 without turning this into a second buy-sell course. If Priya incorporates a design firm, ask: does the corporation need key-person dollars on her life, do the shareholders need buy-sell funding, and has a lender asked for a collateral assignment of a personal policy? Those are new needs. They are not a reason to strip the family’s income-replacement policy unless a replacement file (with disclosure) shows the old contract no longer fits.

Leaving Canada

Leaving Canada is on CISRO’s 4.1 list because almost every input to the needs analysis can move at once: employment, group benefits, the house and mortgage, the spouse’s work permit, the children’s schools, and the tax residency of the owner.

Teach the usual product pattern, then send the candidate to the e-book and to tax/legal advisors for the client’s destination country:

• A personally owned individual life policy generally stays in force if premiums continue to be paid. Emigration is not a statutory cancellation event. Some insurers restrict new coverage, face increases, or reinstatement once the life insured or owner is a non-resident — that is a company rule, not a reason to tell Priya her in-force term “died at the airport.”
• Employer group life usually ends when Canadian employment ends. Check the conversion privilege and its deadline (often a short window after termination). Conversion without evidence can be the only way to replace group cover if Priya’s health has changed.
• Government death and survivor benefits (CPP/QPP, OAS Allowance, workers’ compensation) are contribution- and residence-sensitive. Do not assume a former resident keeps the same public package; do not invent that CPP contributions are erased.
• Tax residency can change how later dispositions of a permanent policy are taxed in Canada and whether the new country taxes the death benefit. That is not a 4.1 invitation to give cross-border tax opinions. It is a reason to recommend a qualified advisor and to record that the insurance need was re-measured.
• A death claim may now involve two legal systems. Named-beneficiary proceeds still generally bypass the Canadian estate, but an estate-class beneficiary plus a foreign probate can delay payment.

Worked review. Priya’s file at issue: single, renter, $500,000 20-year term, $80,000 salary, $50,000 group life. Three years later: married, one child, $620,000 mortgage, $120,000 salary, group still $50,000. Human-capital and capital-needs both rose. A defensible 4.1 recommendation is additional term (or a face increase subject to underwriting) so that personal plus group plus any CPP death benefit approach the new capital-needs total, plus a beneficiary/trustee update. If instead she is posted overseas and the Canadian job — and the $50,000 group — end, the same math is run without the group layer, with a conversion discussion, and with a note that the individual $500,000 remains in force if she keeps paying.

Life module practice questionsPractice questions with detailed explanations