LLQP Accident & Sickness · Component 1.3 · 35% of the exam
An employer asks whether it should pay the LTD premium for employees as a goodwill gesture. The agent should explain the trade-off:
- AEmployee-paid LTD produces taxable benefits, so the employer should pay to keep them tax-free
- Employer-paid premiums make benefits taxable, so employee-paid LTD is often better
- CThere is no trade-off, because the tax treatment of the benefit is identical either way
- DPremiums are always a taxable benefit to employees, so who pays makes no difference
Correct answer: B) Employer-paid premiums make benefits taxable, so employee-paid LTD is often better
The curriculum lists the rationale for having employees pay group LTD premiums. The employer can instead pay for other benefits (health, dental, life) and leave LTD to the employees.
Why the other options are wrong
- AThat reverses the rule: employee-paid premiums make benefits tax-free.
- CTaxability of the benefit is exactly the trade-off.
- DPremiums are the employer's choice; the benefit's taxability follows who paid.
Exam tip
Employer pays other benefits; employees pay LTD → tax-free LTD benefits.
Common mistake
Advising employer-paid LTD without discussing benefit taxation.
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.