LLQP Accident & Sickness · Component 1.2 · 35% of the exam
A client's employer pays the premium for group critical illness coverage. The tax treatment is that:
- AThe premium is not a taxable benefit and the critical illness payment is taxed as income
- BBoth the premium and the benefit are received free of tax by the employee
- The premium is a taxable benefit to the employee and the benefit is received tax-free
- DThe employee may deduct the premium and is taxed on the benefit when it is paid
Correct answer: C) The premium is a taxable benefit to the employee and the benefit is received tax-free
Employer-paid critical illness premiums are treated as employment income to the member, and the lump sum paid on diagnosis is not taxed in the member's hands.
Why the other options are wrong
- AThe lump sum on diagnosis is not taxable income.
- BThe premium the employer pays is a taxable benefit to the member.
- DEmployees cannot deduct group critical illness premiums.
Exam tip
Employer-paid CI premium is taxable; the lump sum is not.
Common mistake
Assuming group critical illness follows the same tax rule as group health.
What this tests
CISRO competency component 1.2 — 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.