LLQP Accident & Sickness · Component 1.3 · 35% of the exam
A client is a physician earning a high income. Her practice is incorporated and pays her a salary and dividends. The insurable income for DI purposes is generally:
- Her earned income — salary plus corporate earnings from her own services
- BDividends only, since salary paid from her own corporation is not at arm's length
- CThe corporation's gross revenue, since the entire practice depends on her work
- DZero, since income flowing through a professional corporation is not insurable
Correct answer: A) Her earned income — salary plus corporate earnings from her own services
Insurers look through the corporation to the income the owner's work produces. Documentation of both personal and corporate returns is usually required. Investment income is excluded.
Why the other options are wrong
- BSalary is earned income and is counted.
- CGross revenue includes overhead and other people's work.
- DInsurers look through the corporation to the income her work produces.
Exam tip
Incorporated professional: insurable income = compensation attributable to her own services.
Common mistake
Applying for DI on the corporation's gross revenue.
What this tests
CISRO competency component 1.3 — 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.