LLQP Accident & Sickness · Component 1.3 · 35% of the exam
An articulated need for an incorporated business owner might include 'protecting the ability to deduct fixed costs while disabled'. Which product and tax point apply?
- ALong-term care; premiums deductible to the corporation and benefits tax-free to the owner
- Business overhead expense; premiums generally deductible and benefits taxable
- CPersonal DI; premiums deductible whenever the corporation pays them on the owner's behalf
- DCritical illness; benefits taxable and premiums deductible to the business as a salary expense
Correct answer: B) Business overhead expense; premiums generally deductible and benefits taxable
BOE has the distinctive tax profile: deductible premium, taxable benefit, but the benefit pays deductible overhead so the net tax effect is neutral. The curriculum lists tax implications of BOE.
Why the other options are wrong
- APersonal LTC premiums are not deductible.
- CPersonal DI premiums are not deductible.
- DPersonal CI benefits are generally tax-free.
Exam tip
BOE: deductible premium, taxable benefit, pays deductible expenses.
Common mistake
Applying the personal DI tax rule to BOE.
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.