ACCIDENT AND SICKNESS INSURANCE
MOCK EXAM 1 QUESTIONS WITH 100%
CORRECT ANSWERS!!
1 of 30
Definition
(correct) $800 per month
Rationale:
A residual benefit is calculated as: % of loss × total disability benefit if
the qualification period has been satisfied. Donna has satisfied the
qualification period of three months of total disability. The
qualification period includes the waiting period.
Donna's percentage loss of income is 40% ($4,000 - $2,400) /
$4,000)
,The residual benefit is $800 per month (40% × $2,000). (Refer to Section
2.2.4.6)
Give this one a try later!
Harold is Thomas' insurance agent. Harold recently submitted a disability
insurance application with a cheque of $100 for Thomas' monthly premium. The
policy was approved in early June and sent to Harold for delivery. Both Harold
and Thomas were busy and they could not set up an appointment for Harold to
deliver the policy to Thomas. Thomas, however, continued to pay the premiums
for his policy as the insurance company charged premiums based on his
authorization. Ultimately, in October, Thomas could find the time to meet with
Harold. Harold delivered the policy to Thomas on October 15. Since Thomas is
now covered for disability by a group policy, he decides to cancel the policy two
days after receiving it.
Is Thomas eligible to receive a refund of all the premiums he has paid to date?
a)Yes. Thomas had no coverage until the policy was delivered. He has
exercised his rescission rights and, therefore, is entitled
Rhonda and Karl are equal partners of an accounting business. Their business is
currently worth $3,000,000, and their annual business expenses are $240,000.
They share the business expenses equally. The couple wants to have a buy-sell
agreement in place in the event that one of them is disabled for more than one
year. Rhonda and Karl also state that they are each responsible for 50% of their
clients. If one of them were to become disabled, the clients would move over to
another accounting business. This would lead to a loss of revenue as the
business is totally dependent on their expertise in accounting to generate
revenue.
Which of the following recommendations best meets the couple's needs?
a) Purchase a $3,000,000 disability buyout policy on each of their lives and
a business overhead expense policy of $10,000 per month on each of them
,b) Purchase a $3,000,000 disability buyout policy on each of their lives a
Darla's client, Chris, comes to her for some supplemental health insurance.
Darla sets up a policy with a $135 monthly premium. Chris has a fairly new job
and he has been told he is covered by a corporately-owned individual disability
policy. Chris' employer will be paying the $135 premium every month and this
premium will be a taxable benefit to Chris. He finds this quite confusing and
does not
understand if his benefits will be taxed.
Which of the following statements is true?
a) Chris will pay the tax on any benefits he receives since the employer paid
the premiums.
b)The benefits will not be taxable to him as the premiums are a taxable
benefit to him.
c) The benefits will be taxable to him because it is a corporately owned policy.
d) The benefits will not be taxable to him since he is the beneficiary of the policy.
Donna makes $4,000 per month as a self-employed contractor. She owns
an individual disability policy that provides her with a benefit of $2,000 per
month for total disability after a waiting period of one month. The policy
includes a residual disability provision which provides her with a residual
benefit after a qualification period of three months. Donna injures her hand
while using a tool and the doctor puts her under treatment for three
months during which time she is declared totally disabled. After the
treatment, she can return to work while her hand is still healing. She is put
on modified duties and earns $2,400 per month.
How much will Donna's residual benefit be?
a) $0 as the policy has a waiting period of one month
b) $2,000 per month
, c) $1,000 per month as Donna is partially disabled.
d) $800 per month
Don't know?
2 of 30
Term
Koenigsberg, Incorporated is a Winnipeg aerospace company, with
subsidiary plants in Montreal and Houston. When Koenigsberg's
CFO retires, Tamara, a rising star in the finance department, is chosen
to take his place. Because of Tamara's crucial importance to the
corporation, Koenigsberg takes out a key person disability insurance
policy on her.
With respect to the key person insurance policy, which of the
following statements is true?
a)The premiums paid are a tax-deductible expense to
the corporation.
b) If Tamara is disabled, the benefit received from the policy
is taxable income to the corporation.
c) The premiums paid by the corporation are not a tax-deductible
expense.
MOCK EXAM 1 QUESTIONS WITH 100%
CORRECT ANSWERS!!
1 of 30
Definition
(correct) $800 per month
Rationale:
A residual benefit is calculated as: % of loss × total disability benefit if
the qualification period has been satisfied. Donna has satisfied the
qualification period of three months of total disability. The
qualification period includes the waiting period.
Donna's percentage loss of income is 40% ($4,000 - $2,400) /
$4,000)
,The residual benefit is $800 per month (40% × $2,000). (Refer to Section
2.2.4.6)
Give this one a try later!
Harold is Thomas' insurance agent. Harold recently submitted a disability
insurance application with a cheque of $100 for Thomas' monthly premium. The
policy was approved in early June and sent to Harold for delivery. Both Harold
and Thomas were busy and they could not set up an appointment for Harold to
deliver the policy to Thomas. Thomas, however, continued to pay the premiums
for his policy as the insurance company charged premiums based on his
authorization. Ultimately, in October, Thomas could find the time to meet with
Harold. Harold delivered the policy to Thomas on October 15. Since Thomas is
now covered for disability by a group policy, he decides to cancel the policy two
days after receiving it.
Is Thomas eligible to receive a refund of all the premiums he has paid to date?
a)Yes. Thomas had no coverage until the policy was delivered. He has
exercised his rescission rights and, therefore, is entitled
Rhonda and Karl are equal partners of an accounting business. Their business is
currently worth $3,000,000, and their annual business expenses are $240,000.
They share the business expenses equally. The couple wants to have a buy-sell
agreement in place in the event that one of them is disabled for more than one
year. Rhonda and Karl also state that they are each responsible for 50% of their
clients. If one of them were to become disabled, the clients would move over to
another accounting business. This would lead to a loss of revenue as the
business is totally dependent on their expertise in accounting to generate
revenue.
Which of the following recommendations best meets the couple's needs?
a) Purchase a $3,000,000 disability buyout policy on each of their lives and
a business overhead expense policy of $10,000 per month on each of them
,b) Purchase a $3,000,000 disability buyout policy on each of their lives a
Darla's client, Chris, comes to her for some supplemental health insurance.
Darla sets up a policy with a $135 monthly premium. Chris has a fairly new job
and he has been told he is covered by a corporately-owned individual disability
policy. Chris' employer will be paying the $135 premium every month and this
premium will be a taxable benefit to Chris. He finds this quite confusing and
does not
understand if his benefits will be taxed.
Which of the following statements is true?
a) Chris will pay the tax on any benefits he receives since the employer paid
the premiums.
b)The benefits will not be taxable to him as the premiums are a taxable
benefit to him.
c) The benefits will be taxable to him because it is a corporately owned policy.
d) The benefits will not be taxable to him since he is the beneficiary of the policy.
Donna makes $4,000 per month as a self-employed contractor. She owns
an individual disability policy that provides her with a benefit of $2,000 per
month for total disability after a waiting period of one month. The policy
includes a residual disability provision which provides her with a residual
benefit after a qualification period of three months. Donna injures her hand
while using a tool and the doctor puts her under treatment for three
months during which time she is declared totally disabled. After the
treatment, she can return to work while her hand is still healing. She is put
on modified duties and earns $2,400 per month.
How much will Donna's residual benefit be?
a) $0 as the policy has a waiting period of one month
b) $2,000 per month
, c) $1,000 per month as Donna is partially disabled.
d) $800 per month
Don't know?
2 of 30
Term
Koenigsberg, Incorporated is a Winnipeg aerospace company, with
subsidiary plants in Montreal and Houston. When Koenigsberg's
CFO retires, Tamara, a rising star in the finance department, is chosen
to take his place. Because of Tamara's crucial importance to the
corporation, Koenigsberg takes out a key person disability insurance
policy on her.
With respect to the key person insurance policy, which of the
following statements is true?
a)The premiums paid are a tax-deductible expense to
the corporation.
b) If Tamara is disabled, the benefit received from the policy
is taxable income to the corporation.
c) The premiums paid by the corporation are not a tax-deductible
expense.
