LLQP Accident & Sickness · Component 1.2 · 35% of the exam
A client's group LTD is employer-paid. In assessing its adequacy, the agent must remember that:
- AThe benefit is tax-free, since the employer's contribution is a non-taxable benefit
- BThe benefit is paid to the employer, which passes it on to the employee net of tax
- CThe benefit is grossed up by the insurer to compensate for the tax withheld
- The benefit is taxable, so the after-tax replacement falls well below the formula
Correct answer: D) The benefit is taxable, so the after-tax replacement falls well below the formula
Employer-paid LTD benefits are taxable income. A 66% gross benefit may net far less after tax. The needs analysis must compare after-tax benefit with after-tax expenses.
Why the other options are wrong
- AEmployer-paid LTD benefits are taxable income to the employee.
- BThe employee receives the benefit directly; the employer is not in the payment chain.
- CNo insurer grosses up a group benefit for tax; the formula amount is what is paid.
Exam tip
Employer-paid LTD → taxable benefit → smaller net replacement. Fill the gap with individual DI (tax-free).
Common mistake
Comparing a gross taxable benefit with net expenses.
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.