LLQP Accident & Sickness · Component 1.3 · 35% of the exam
Two partners have a buy-sell agreement that requires a buyout if one is permanently disabled. The need created is:
- AJoint life insurance on both partners, payable to the partnership at the first death
- Disability buyout insurance to fund the purchase of the disabled partner's interest
- CPersonal DI on each partner, sized so the benefit could also pay the buyout price
- DBusiness overhead insurance to keep paying the disabled partner's share of fixed costs
Correct answer: B) Disability buyout insurance to fund the purchase of the disabled partner's interest
Disability buyout funds the purchase obligation under the agreement, typically after a long elimination period (one to two years). It is listed among business-related A&S needs.
Why the other options are wrong
- ALife insurance funds the death trigger, not the disability trigger.
- CPersonal DI replaces income; insurers will not size it to a buyout.
- DBOE pays overhead, not the purchase of a partner's interest.
Exam tip
Disability buyout: long elimination period, lump sum matched to the agreement's valuation.
Common mistake
Funding a buy-sell for death only.
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.