LLQP Accident & Sickness · Component 1.3 · 35% of the exam
A client tells the agent he already has enough coverage because his group plan pays two-thirds of salary. The needs analysis should test whether:
- AGroup plans are required to index the benefit, which protects the two-thirds over a long claim
- BThe two-thirds applies after all offsets, so government benefits are paid in addition
- The plan's benefit is taxable and capped, which can leave far less than two-thirds after tax
- DThe plan pays two-thirds of gross salary, which after tax leaves his net income unchanged
Correct answer: C) The plan's benefit is taxable and capped, which can leave far less than two-thirds after tax
An employer-paid benefit is taxable and usually capped, so the net replacement for a well-paid client can fall far below the percentage in the booklet.
Why the other options are wrong
- AIndexation is optional and absent from most group designs.
- BOffsets reduce the plan's payment; government benefits do not come on top.
- DTax on an employer-paid benefit reduces the net well below the gross percentage.
Exam tip
Gross percentage, cap, tax and offsets all cut the real replacement rate.
Common mistake
Accepting the booklet's percentage as the client's net income replacement.
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.