LLQP Ethics & Professional Practice · Component 2.2 · 40% of the exam
An employer offers to pay the premiums on a policy owned by and insuring a key employee personally. The agent should:
- flag that the payments may be a taxable benefit and recommend tax advice for both parties
- Badvise that an employer may never pay premiums on an employee's personal policy
- Carrange it without comment, since the source of the premium is a private arrangement
- Drecord the employer as the policy owner so that the premium payments match what the file shows
Correct answer: A) flag that the payments may be a taxable benefit and recommend tax advice for both parties
Premiums paid by an employer for an employee's personal coverage are generally a taxable benefit, and the deductibility depends on the arrangement. Identifying the issue and referring it on is the agent's role.
Why the other options are wrong
- BSuch arrangements are permitted; they simply have tax consequences.
- CWho pays the premium has tax consequences that must be raised.
- DRecording the wrong owner to match the payment would falsify the file.
Exam tip
Whenever someone else pays the premium, raise the tax consequences.
Common mistake
Ignoring who actually pays the premium when arranging coverage.
What this tests
CISRO competency component 2.2 — Integrate into practice the rules governing the activities of life insurance agents — which is weighted at 40% of the Ethics & Professional Practice module. Written against the published curriculum.
More from component 2
- A prospective client wants to confirm that an agent is properly licensed before meeting him. She should:
- A dual-licensed agent's mutual fund business is reviewed following a client complaint. The review will be conducted by:
- Assuris coverage applies to:
- OLHI's services are available to:
- Complaints about an agent's conduct (as opposed to an insurer's claim decision) should be directed to:
- The best summary of an agent's ethical obligations is to:
Practice the whole Ethics & Professional Practice module
Timed sets weighted like the exam, and review of every question you miss. Free to start.