LLQP Life Insurance · Component 2.1 · 30% of the exam
Provincial sales or premium taxes applied to group insurance premiums:
- AAre refunded to the employee at year end through the payroll tax reconciliation
- BApply only to life insurance, never to health benefits, which are exempt as medical expenses
- Vary by province and can affect the cost of a plan and, where the employer pays, the value of the taxable benefit
- DDo not exist, since insurance premiums are exempt from provincial sales and premium taxes in every province and territory
Correct answer: C) Vary by province and can affect the cost of a plan and, where the employer pays, the value of the taxable benefit
The curriculum asks agents to understand the Canadian commodity-tax system as it applies to employee benefits, federally and provincially. Retail sales tax on group premiums in some provinces adds to plan cost and must be factored into quotes.
Why the other options are wrong
- AThese taxes are not refunded to employees.
- BRetail sales tax on group premiums, where levied, applies to health benefits as well.
- DProvincial premium and sales taxes on insurance exist.
Exam tip
Group plan costs include provincial taxes on premiums; they vary by province and affect quotes and taxable-benefit values.
Common mistake
Quoting group premiums without provincial tax.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.