LLQP Accident & Sickness · Component 1.3 · 35% of the exam
Two partners want the business to be bought out if either becomes permanently disabled. The product that meets this need is:
- AGroup long-term disability, which pays a monthly benefit the survivor can use to buy the shares
- BKey person disability insurance, which pays the disabled partner for the loss of the interest
- Disability buy-sell coverage, which funds the purchase of the disabled partner's interest
- DBusiness overhead expense insurance, which funds the purchase over the benefit period
Correct answer: C) Disability buy-sell coverage, which funds the purchase of the disabled partner's interest
A disability buy-sell provides the capital at the trigger point set in the agreement so the active partner can acquire the interest and the disabled partner receives value for it.
Why the other options are wrong
- AGroup benefits are sized to income and cannot fund an ownership transfer.
- BKey person coverage compensates the business, not the departing owner.
- DOverhead coverage reimburses running costs and cannot fund a purchase.
Exam tip
Buy-sell funds the transfer; key person funds the disruption.
Common mistake
Planning a buyout at death but not at disability.
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.