LLQP Accident & Sickness · Component 2.1 · 30% of the exam
A CI policy is generally owned personally and paid with after-tax dollars. Its benefit is:
- ADeductible against the insured's income in the year the benefit is received from the insurer
- Received tax-free, with the premiums not deductible
- CTaxable as income in the year received, in the same way as a disability benefit
- DTaxable at 50%, in the same way as a capital gain on the sale of an investment
Correct answer: B) Received tax-free, with the premiums not deductible
CI benefits paid to an individual are generally tax-free, and the premiums are not deductible. Corporate ownership complicates this and is dealt with under recommendations.
Why the other options are wrong
- ABenefits are received, not deducted.
- CPersonal CI benefits are not taxed.
- DThere is no half-inclusion for CI benefits.
Exam tip
Personal CI: premium not deductible, benefit tax-free.
Common mistake
Promising the same tax outcome for corporately owned CI.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Accident & Sickness module. Written against the published curriculum.
More from component 2
- A group benefits booklet lists AD&D coverage alongside life and LTD. The AD&D benefit pays:
- A hospital indemnity (hospital cash) policy pays:
- Employment Insurance sickness benefits are available to:
- Which government program coordinates with an individual DI policy through a possible offset AND also affects the definition of insurable income?
- A group plan's 'eligibility waiting period' (probationary period) is:
- A CI policy that is 'convertible' allows the insured to:
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.