LLQP Accident & Sickness · Component 1.2 · 35% of the exam
An employee's group LTD plan is fully employee-paid but the employer collects the premium through payroll. The benefit will be:
- Non-taxable, because the employee bears the whole cost with after-tax dollars
- BSplit between taxable and non-taxable in proportion to the administration cost the employer absorbs
- CTaxable, since the employer's involvement in collecting the premium makes it an employer plan
- DTaxable for the first two years of any claim and non-taxable thereafter
Correct answer: A) Non-taxable, because the employee bears the whole cost with after-tax dollars
The test is who actually pays the premium, not who remits it, so a wholly employee-paid plan produces a tax-free benefit even when deductions run through payroll.
Why the other options are wrong
- BAdministration costs do not create a partial inclusion in income.
- CCollecting a premium by payroll deduction does not make the employer the payer.
- DThere is no rule changing the tax treatment after two years of claim.
Exam tip
Who pays the premium decides the tax, not who remits it.
Common mistake
Assuming payroll deduction means the employer paid.
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.