LLQP Accident & Sickness · Component 2.1 · 30% of the exam
A disability buyout policy typically differs from income replacement DI in that it:
- AHas a 30-day waiting period so the buyout can proceed before the business suffers
- BPays a monthly benefit to the disabled owner for the rest of his or her life
- Pays a lump sum to buy the owner's interest after a long elimination period
- DIs tax-free to the disabled owner as personal disability income under the ITA
Correct answer: C) Pays a lump sum to buy the owner's interest after a long elimination period
Buyout coverage waits long enough to confirm the disability is permanent, then funds the transaction. The amount is tied to the business valuation in the agreement.
Why the other options are wrong
- AElimination periods are long, not short.
- BIt funds a purchase, not lifetime income.
- DThe tax treatment follows the sale of the interest, not personal DI rules.
Exam tip
Disability buyout: long elimination period, lump sum, matched to the buy-sell agreement.
Common mistake
Applying a short waiting period to a buyout policy.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Accident & Sickness module. Written against the published curriculum.
More from component 2
- A group benefits booklet lists AD&D coverage alongside life and LTD. The AD&D benefit pays:
- A hospital indemnity (hospital cash) policy pays:
- Employment Insurance sickness benefits are available to:
- Which government program coordinates with an individual DI policy through a possible offset AND also affects the definition of insurable income?
- A group plan's 'eligibility waiting period' (probationary period) is:
- A CI policy that is 'convertible' allows the insured to:
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.