LLQP Life Insurance · Component 4.2 · 10% of the exam
A death benefit paid to a named beneficiary from a group life plan is:
- Received tax-free, the same as an individual policy's death benefit
- BTaxable as employment income, since the coverage was a benefit of the deceased's employment
- CTaxable at 50%, since half of a group benefit is treated as a capital gain to the beneficiary
- DSubject to CPP contributions, since the payment is made through the employer's payroll system
Correct answer: A) Received tax-free, the same as an individual policy's death benefit
The curriculum asks for the tax treatment of death benefits under individual and group plans; both are tax-free to the beneficiary. The taxable element of group life is the employer-paid premium during the member's lifetime, not the benefit.
Why the other options are wrong
- BGroup life death benefits are not employment income.
- CThere is no 50% inclusion; it is tax-free.
- DCPP contributions do not apply to death benefits.
Exam tip
Death benefits — individual or group — are tax-free to the beneficiary. Group's taxable element is the employer-paid premium during life.
Common mistake
Confusing the taxable premium benefit with the death benefit.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Life Insurance module. Written against the published curriculum.
More from component 4
- After a policy is reinstated, the contestability period:
- A revocable beneficiary designation is changed by:
- A client asks the agent to hold the beneficiary change form 'until next week' and dies in the meantime. The consequence is that:
- A client wants to reduce the face amount of her policy because her needs have fallen. The agent should note that:
- A client is unable to pay premiums temporarily on a whole life policy. Before letting it lapse, the agent should suggest:
- A client's term policy is being replaced with a new one from another insurer because it is cheaper and he remains healthy. To protect the client, the agent should ensure that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.