LLQP Accident & Sickness · Component 1.2 · 35% of the exam
A client's employer self-insures its short-term disability plan through an administrative services only arrangement. The review should note that:
- ASelf-insured plans are prohibited by provincial insurance legislation and cannot be relied on
- BThe arrangement makes the benefit tax-free regardless of who pays the administration fee
- Benefits depend on the employer's continued solvency and willingness to fund the plan
- DAn insurer guarantees the benefits, since the plan is administered by an insurance company
Correct answer: C) Benefits depend on the employer's continued solvency and willingness to fund the plan
Under an administrative services only arrangement the insurer processes claims but the employer pays them, so the security of the benefit rests on the employer rather than on an insurance contract.
Why the other options are wrong
- ASelf-insured short-term plans are common and lawful.
- BTaxability turns on who pays the premium or funds the benefit, not on the administration model.
- DThe administrator adjudicates and pays from the employer's funds; it does not insure the risk.
Exam tip
Administrative services only means the employer carries the risk.
Common mistake
Treating an administered plan as if an insurer guaranteed it.
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.