LLQP Accident & Sickness · Component 1.2 · 35% of the exam
A client's group LTD plan defines pre-disability earnings as base salary only. For a client who earns large bonuses this means:
- The plan replaces a much smaller share of her actual income than the stated percentage suggests
- BShe should ask the insurer to recalculate the benefit using her notices of assessment
- CHer bonuses are added to base salary automatically once a claim has continued for a year
- DThe plan is invalid, since a disability benefit must be based on total compensation
Correct answer: A) The plan replaces a much smaller share of her actual income than the stated percentage suggests
A percentage of base salary can be a small fraction of total earnings for a bonus-heavy client, so the headline replacement rate overstates the protection the plan actually provides.
Why the other options are wrong
- BThe insurer applies the plan's definition regardless of what tax documents show.
- CThe definition of earnings is fixed by the plan and does not expand during a claim.
- DPlans commonly define earnings as base salary, and that definition is enforceable.
Exam tip
Read the plan's definition of earnings, not just the percentage.
Common mistake
Multiplying total compensation by the plan's replacement percentage.
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.