LLQP Accident & Sickness · Component 1.1 · 35% of the exam
A client incorporated her consulting practice last year and pays herself by dividend rather than salary. For disability underwriting this matters because:
- Dividends are unearned income, so the insurer may need corporate financial statements to establish earnings
- BDividends are treated as salary automatically, so a personal notice of assessment is all the insurer needs
- CDividend income disqualifies her from any individual disability coverage under provincial rules
- DThe corporation must own the policy, since only the corporation has an insurable interest in her earnings
Correct answer: A) Dividends are unearned income, so the insurer may need corporate financial statements to establish earnings
Insurers look through the payment method to the income the business actually generates from her work, so corporate statements and the shareholder's position usually have to be produced.
Why the other options are wrong
- BA personal notice of assessment showing only dividends does not establish earned income.
- COwner-managers paid by dividend are insured routinely once earnings are documented.
- DShe can own the policy personally; ownership is a planning choice, not a requirement.
Exam tip
Dividend-paid owners need corporate financials to prove earned income.
Common mistake
Quoting a benefit from a notice of assessment that shows dividends only.
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.