LLQP - Life License Qualification Program Group Benefits Plan Concepts Questions and Answers

Question 1

A mid-sized company offers a group benefits plan where it pays the entire premium for all eligible employees. The insurer mandates that 100% of eligible employees must be enrolled. What is this type of plan called?

Accepted Answer

A non-contributory plan

Answer

A non-contributory plan is one where the employer pays the full premium. To prevent adverse selection (where only those who expect to claim will join), insurers typically require 100% participation from all eligible employees.

Question 2

An employee is covered under a group long-term disability (LTD) plan where the employer pays 100% of the premiums. If the employee becomes disabled and starts receiving monthly benefits, what is the tax treatment of these benefits?

Accepted Answer

The benefits are considered taxable income to the employee.

Answer

In Canada, when an employer pays all or part of the premiums for a group disability plan, any benefits received by the employee are considered taxable income. If the employee had paid 100% of the premiums with after-tax dollars, the benefits would have been non-taxable.

Question 3

Mei and her husband, Liam, are both covered under their respective employers' group health plans, and they have also covered their dependent child on both plans. Mei's birthday is March 15th, and Liam's is August 2nd. If their child requires a medical service, how will the claim be paid under standard coordination of benefits (COB) rules?

Accepted Answer

Mei's plan pays first because her birthday occurs earlier in the calendar year.

Answer

Under the Canadian Life and Health Insurance Association (CLHIA) guidelines for coordination of benefits, the "birthday rule" is used for dependent children. The plan of the parent whose birthday (month and day) comes first in the calendar year is the primary payer. Since Mei's birthday is in March and Liam's is in August, Mei's plan pays first.

Question 4

An employee who is covered by $200,000 of group life insurance resigns from their job. Which of the following statements best describes the 'conversion privilege' available to this employee?

Accepted Answer

The employee is entitled to receive the cash surrender value of their group coverage.

Answer

The conversion privilege allows an employee whose group life coverage terminates (e.g., due to leaving their job) to convert that coverage into an individual permanent life insurance policy without having to provide evidence of insurability. This must typically be done within 31 days of the termination of group coverage.

Question 5

A large corporation decides to self-fund its employees' health and dental claims but hires an insurance company to handle claims processing and administration. The corporation assumes the financial risk for the claims paid. What is this type of arrangement called?

Accepted Answer

An Administrative Services Only (ASO) plan

Answer

In an Administrative Services Only (ASO) arrangement, the employer self-funds the claims and assumes the financial risk, while contracting with a third party (often an insurer) to provide administrative functions like claims adjudication. This is in contrast to a fully insured plan, where the insurer assumes the risk in exchange for a premium.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Group Benefits Plan Concepts Questions and Answers