LLQP Accident & Sickness · Component 1.1 · 35% of the exam
A client has a large investment portfolio generating income but a modest salary. For disability insurance:
- Portfolio income reduces the insurable amount, so his real need is smaller
- BHe cannot buy DI at all because most of his income is unearned
- CPortfolio income is added to salary, increasing the benefit he can buy, since the insurer looks at total income
- DThe portfolio is ignored because only employment income is ever underwritten
Correct answer: A) Portfolio income reduces the insurable amount, so his real need is smaller
Unearned income is deducted in setting DI benefits because the purpose is to replace lost earned income without over-insuring. The client's need is correspondingly smaller.
Why the other options are wrong
- BHe can buy DI on his earned income; unearned income only reduces the amount.
- CUnearned income continues during disability, so it reduces rather than increases the benefit.
- DUnearned income is explicitly considered in setting the benefit.
Exam tip
Substantial unearned income lowers both need and insurable amount.
Common mistake
Ignoring unearned income and applying for a benefit the insurer will cut back.
What this tests
CISRO competency component 1.1 — Assess the client's needs and situation — which is weighted at 35% of the Accident & Sickness module. Written against the published curriculum.
More from component 1
- The single most important fact for sizing a client's disability income need is:
- A client's beneficiaries for assets are listed in the fact-finding. Why does this matter for A&S planning?
- A client asks why the agent wants to know how assets are owned (jointly or individually). In the A&S context the answer is:
- A client mentions a back injury five years ago that fully resolved. The agent should:
- Which element of a client's situation most affects the definition of disability that should be recommended?
- Which of the following health facts is most relevant to a client's disability insurance situation?
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.