🩺 Accident and Sickness Insurance

1. Owen, 38, earns a salary of $72,000 a year. He also receives $5,000 in interest and $3,000 in dividends from his investments. He applies for individual disability income insurance. What amount is treated as his earned income when the maximum benefit is set?

1. $72,000
2. $75,000
3. $77,000
4. $80,000

Disability income coverage is based on earned income, and Owen's only earned income is his $72,000 salary. Interest and dividends are investment income, so adding the $3,000 (to reach $75,000), the $5,000 (to reach $77,000) or both (to reach $80,000) would overstate the income that can be insured.

2. Fatima is divorced. She pays court-ordered child support each month and also helps pay for her mother's care. While determining her situation, why does the agent record these family commitments?

1. They fix the waiting period that the insurer allows
2. They are commitments that her income must keep supporting
3. They lower the earned income that can be insured
4. They matter for her life insurance but not for disability cover

Financial responsibilities between family members are part of the client's situation because they show how much income must be protected if she cannot work. They do not set the waiting period, they do not reduce the earned income that can be insured, and they are relevant to disability needs as well as to life insurance needs.

3. During the interview, Owen says he has taken daily medication for high blood pressure for three years. What should the agent do with this information?

1. Leave it out of the file because the condition is controlled
2. Record the medication and health history in the file
3. Mention it if the dose was changed during the past year
4. Keep it aside until the underwriter asks about his medication

Fact-finding covers past and present health issues and the list of past and present medications used. The information must be recorded whether or not the condition is controlled or recently changed, and the agent does not wait for the underwriter to ask for it.

4. Hannah, 52, has watched her 78-year-old mother lose the ability to bathe and dress herself and come to need daily care at home. Hannah wants to plan for the cost if the same thing happens to her later in life. Which need is she describing?

1. Funds to pay for medical treatments and time off work
2. Income replacement while she is disabled from her job
3. Funds for a loss of independence and daily care
4. Liquidity to reach her long-term financial goals

Planning for the cost of care after a loss of independence is the need that follows a long-term care diagnosis: capital for the loss of independence and the daily care it requires. Medical treatments and time off work relate to a critical illness, income replacement relates to a disability, and liquidity for long-term goals is a different type of need.

5. Which of the following is NOT earned income for the purpose of assessing an individual's disability coverage?

1. Salary paid by an employer for a full-time position
2. Commissions paid to a salaried sales representative
3. Net income from the client's own unincorporated business
4. Dividends on shares in a personal investment portfolio

Dividends on shares held in a personal investment portfolio are investment income, which is not earned income. Commissions and salary are paid for work performed, and net business income is the earnings of a self-employed client, so all three count as earned income.

6. Which of the following best describes investment income?

1. Pay received for work done under an employment contract
2. Benefits paid by an insurer after a claim is approved
3. Interest and dividends earned on the client's capital
4. Payments received from a pension plan after retirement

Investment income is what the client's capital earns, such as interest and dividends. Pay for work is earned income, claim payments are insurance benefits, and payments from a pension plan are pension income; a client's financial profile lists each of these as a separate source of income.

7. Maple Ridge Logistics Ltd. asks for a quote for a group accident and sickness plan for its employees. What length of claims experience does the agent gather about the group?

1. One year of claims experience
2. Five years of claims experience
3. Two years of claims experience
4. Ten years of claims experience

The group client's situation includes two years of claims experience, together with the nature of the business and the employee data sheet. A single year is too short to show a pattern, and five or ten years go beyond what the fact-finding calls for.

8. Kwame drove a long-haul truck for 15 years. Six months ago he became an office-based dispatcher. When the agent documents his occupation, which information matters most?

1. His job title and duties in his first position after school
2. The group premium rates that apply to dispatchers
3. Whether his commercial driver's licence is still valid
4. His current daily duties and how long he has held the role

The occupation section records the type of job, the daily duties, the length of time in the current role and the training and education. Kwame's current duties and time as a dispatcher describe the risk now, while his first job, group premium rates and a driver's licence do not.

9. Priya, 44, worries about what she would face if she were diagnosed with cancer: treatments and months away from her job. Which additional capital need does she describe?

1. Funds for daily care after a loss of independence
2. Liquidity to build her retirement income
3. Funds for medical treatments and time off work
4. Funds to replace a spouse's income at death

After a critical illness diagnosis, the additional capital is needed for medical treatments and time off work. Daily care after a loss of independence is a long-term care need, retirement income is a separate liquidity objective, and replacing a spouse's income concerns a death.

10. Amira, 35, says she does not need disability coverage because she holds life insurance and a disabling illness is far less likely than death. What is the agent's most accurate reply?

1. Before age 65, disability is statistically more likely than death
2. Her life policy would pay her during a disability, so she is covered
3. Disability is unlikely at her age, so the need can wait until age 50
4. Government plans would replace her income, so private cover is unneeded

Before age 65, a disabling illness or accident is statistically more probable than death, so the loss of income is a real risk to assess. A life policy pays its benefit at death, not an income during a disability; a review at 50 ignores the risk today; and government plans seldom replace a full income.

11. Kofi is covered by a group long-term disability plan for which his employer pays the whole premium. Which statement describes the tax treatment of the monthly benefits he would receive?

1. They are tax-free because they are paid by an insurer
2. They are taxable income because he paid none of the premium
3. They are tax-free because the plan is part of his job
4. They are taxed on the portion that exceeds his regular salary

Under paragraph 6(1)(f) of the Income Tax Act, periodic benefits for a loss of employment income paid under a disability insurance plan to which the employer has made a contribution are included in income, reduced only by “the total of the contributions made by the taxpayer under the plan”. Kofi made none, so the whole benefit is taxable and his net replacement is lower than the gross amount. Payment by an insurer or through his job does not make it tax-free, since the employer's contribution is what brings it into income, and the whole benefit is taxed, not a portion above his salary.

12. Owen's monthly expenses during a disability would be $3,000. His group plan would pay a net $2,400 and his individual policy a net $1,900 for the same period. What does the comparison of needs and resources show?

1. A gap of $1,100 that the individual policy leaves
2. A gap of $600 that the group plan leaves uncovered
3. An overlap, with a surplus of $1,300 above the need
4. A balance, because each source pays close to the need

The two sources total $4,300 ($2,400 + $1,900), which exceeds the $3,000 need by $1,300, so the coverages overlap and leave a surplus. The $600 and $1,100 figures look at one source alone, and the sources do not balance the need exactly.

13. Which of the following does the agent document about an individual client's financial situation? 1. Employee benefits 2. Participation in employer-sponsored savings plans 3. Amount of savings available for emergencies 4. An employee data sheet

1. 1, 2 and 3
2. 1 and 3
3. 2 and 4
4. 1, 3 and 4

The individual client's financial situation includes employee benefits, participation in employer-sponsored savings plans and the savings available for emergencies. The employee data sheet belongs to the group client's situation, so any answer that includes proposition 4 is wrong.

14. To document the history of an individual client's income, which records does the agent ask the client for?

1. Tax returns and notices of assessment for two or more years
2. The employer's most recent audited year-end financial statements
3. A letter from the client's accountant confirming expected income
4. The latest pay stub together with the most recent bank statement

The agent reviews the client's prior tax returns and notices of assessment for at least the past two years. A pay stub and bank statement show only a moment in time, and employer statements or an accountant's letter are not the client's own filed records.

15. Why does the agent record the nature of the business when assessing a group client's situation?

1. It sets the maximum benefit payable to every employee
2. It fixes the premium that the insurer charges each year
3. It determines the employer's corporate income tax rate
4. It indicates the occupational risks the employees face

The nature of the business shows the kind of work done and so the occupational risks of the group, which the agent weighs with the claims experience and the employee data sheet. It does not by itself set each employee's maximum benefit, the employer's tax rate or the premium.

16. In the needs analysis process, which step comes immediately after the comparison of the client's needs with existing resources?

1. Documenting the client's financial position, obligations and risks
2. Identifying suitable coverage or changes to the existing coverage
3. Determining the client's stated needs, goals and priorities
4. Identifying the implications of the changes to the insurance coverage

Comparing needs against existing resources shows the surplus, overlaps and gaps, and the next step is to identify suitable coverage or changes to the existing coverage that address them. Determining needs and goals and documenting the financial position, obligations and risks come before the comparison, and the implications of changes can be identified only once those changes are known.

17. When the client's needs are compared with existing resources, what is a gap?

1. A part of the need that no existing resource covers
2. Resources that are larger than the identified needs
3. Coverage from two sources that answers the same need
4. A period before the first benefit payment is made

A gap is the portion of the need that existing coverage and resources leave uncovered. Two sources answering the same need is an overlap, resources above the need is a surplus, and the period before the first payment is the elimination period.

18. In a needs analysis, what is an overlap?

1. A need that the client's resources leave unanswered
2. Two sources of coverage that pay for the same need
3. A waiting period before the first benefit is paid
4. Resources whose value exceeds the client's total need

An overlap occurs when two or more coverages or resources respond to the same need. A need that nothing answers is a gap, the waiting period is the elimination period, and resources whose value exceeds the need are a surplus.

19. Which of the following is NOT something the agent examines to determine the additional capital required after a disability?

1. The beneficiary of the client's life insurance policy
2. The effect on the client's retirement and estate plan
3. The effect on the family and on wealth accumulation goals
4. The expenses that must still be paid during the disability

After a disability, the agent looks at the expenses to be covered and the impact on the family, wealth accumulation goals, retirement and estate plan. The beneficiary of a life policy concerns the death benefit, not the capital needed during a disability.

20. Owen earns a gross salary of $5,500 a month. If he became disabled, his household would need $4,200 a month after tax. His employer pays the whole premium for a group plan that pays 60% of his gross salary. Assume the benefit is taxed at an average rate of 20%. What is his monthly shortfall?

1. $900
2. $1,680
3. $1,560
4. $2,640

The gross benefit is 60% of $5,500, or $3,300. Because the employer paid the whole premium, the benefit is taxable under paragraph 6(1)(f) of the Income Tax Act, so the after-tax benefit is $3,300 x 0.80 = $2,640 and the shortfall is $4,200 - $2,640 = $1,560. $900 ignores the tax ($4,200 - $3,300), $1,680 applies the 60% to the need instead of the salary ($4,200 - $2,520), and $2,640 is the after-tax benefit, not the shortfall.

21. Priya has a disability policy with a 120-day elimination period. Her household needs $3,000 a month during a disability, and she has $7,500 in emergency savings. Assume a month has 30 days and that benefits start as soon as the elimination period ends. How much more must she find to cover the elimination period?

1. $19,500
2. $7,500
3. $12,000
4. $4,500

A 120-day period is four months, so the household needs 4 x $3,000 = $12,000, and $12,000 - $7,500 of savings leaves $4,500. $7,500 is the savings themselves, $12,000 ignores the savings and $19,500 adds the savings to the need.

22. Amira, 41, is diagnosed with a serious illness and her physician says she cannot work for several months. Assume she qualifies for Employment Insurance sickness benefits. According to the Employment Insurance Act, what is the maximum number of weeks for which benefits may be paid in a benefit period because of a prescribed illness, injury or quarantine?

1. 15 weeks
2. 52 weeks
3. 35 weeks
4. 26 weeks

Paragraph 12(3)(c) of the Employment Insurance Act sets the maximum at 26 weeks in a benefit period because of a prescribed illness, injury or quarantine. Fifteen weeks is the maximum for pregnancy and for caring for a critically ill adult, 35 weeks applies to caring for a critically ill child, and no special benefit in subsection 12(3) has a 52-week maximum.

23. Consider the following statements about the maximum number of weeks of Employment Insurance special benefits in a benefit period under subsection 12(3) of the Employment Insurance Act: 1. Because of a prescribed illness, injury or quarantine: 26 weeks. 2. Because of pregnancy: 26 weeks. 3. For providing care or support to one or more critically ill adults: 15 weeks. 4. For providing care or support to one or more critically ill children: 26 weeks. Which statements are correct?

1. 1 and 2
2. 3 and 4
3. 1 and 3
4. 2, 3 and 4

Paragraph 12(3)(c) of the Employment Insurance Act gives 26 weeks for a prescribed illness, injury or quarantine, and paragraph 12(3)(f) gives 15 weeks for caring for critically ill adults, so statements 1 and 3 are correct. Statement 2 is wrong because paragraph 12(3)(a) sets the maximum for pregnancy at 15 weeks, not 26, and statement 4 is wrong because paragraph 12(3)(e) sets the maximum for caring for critically ill children at 35 weeks, not 26.

24. Ravi, 45, is covered by his employer's wage-loss plan, and the employer's Employment Insurance premium has been reduced because of that plan. After an illness, he is entitled to Employment Insurance sickness benefits for a week, and the plan also pays him an allowance for that same week. How does the Employment Insurance Act treat the allowance?

1. It is added to the benefits payable to him for that week
2. It is deducted from the benefits payable to him for that week
3. It is ignored, because the plan and the Act cover different risks
4. It cancels his entitlement for every later week of the illness

Subsection 21(3) of the Employment Insurance Act provides that, when benefits are payable for a week because of illness, there is deducted from them any allowance payable for that week under a plan covering employees whose employer's premium has been reduced. The allowance is therefore neither added to the benefits nor ignored, and the Act does not end entitlement for later weeks because of it.

25. A claimant who is receiving Employment Insurance sickness benefits is also entitled to money for the same injury under a provincial law, for example a workers' compensation allowance. What does subsection 21(2) of the Employment Insurance Act provide in that situation?

1. The Employment Insurance benefits are increased by the provincial amount
2. The Employment Insurance benefits are reduced or eliminated as prescribed
3. Both are paid in full, because they come from different governments
4. The provincial amount is reduced by the Employment Insurance benefits

Subsection 21(2) of the Employment Insurance Act states that, when benefits are payable for an illness or injury and money is also payable for that illness or injury under a provincial law, the benefits under the Act “shall be reduced or eliminated as prescribed”. They are not increased, the provincial amount is not the one reduced, and paying both in full ignores this rule.

26. Which of the following statements about sources of income and coverage during a disability is NOT correct?

1. Workers' compensation is generally payable when the illness or injury is work-related
2. Employment Insurance sickness benefits are payable for a limited number of weeks
3. A Canada Pension Plan disability pension requires a severe and prolonged disability
4. Provincial health plans replace the employment income that a disabled person loses

Provincial health and drug plans help pay for covered medical care and medicines; they do not replace lost income, which is why disability income coverage is needed. Workers' compensation applies only to work-related conditions, Employment Insurance sickness benefits end after a maximum number of weeks (26 under paragraph 12(3)(c) of the Employment Insurance Act), and subsection 42(2) of the Canada Pension Plan requires a severe and prolonged disability.

27. Under subsection 42(2) of the Canada Pension Plan, a disability is severe only if the person:

1. can no longer perform the duties of their own occupation
2. cannot regularly pursue any substantially gainful occupation
3. has lost more than half of their earnings from employment
4. has been away from work for twelve consecutive months or more

Subparagraph 42(2)(a)(i) of the Canada Pension Plan says a disability is severe only if the person is “incapable regularly of pursuing any substantially gainful occupation”. This is a test against any occupation, not the person's own occupation, and it does not depend on a loss of earnings or a minimum time away from work; the length of the disability is covered by the separate prolonged test.

28. Under subsection 42(2) of the Canada Pension Plan, a disability is prolonged only if it is determined to be:

1. likely to last at least twelve months, after which it is expected to end
2. present on the application date and confirmed by two separate physicians
3. serious enough to prevent the person from doing their own usual job
4. long continued and of indefinite duration, or likely to result in death

Subparagraph 42(2)(a)(ii) of the Canada Pension Plan provides that a disability is prolonged only if it is determined “likely to be long continued and of indefinite duration or is likely to result in death”. A fixed period followed by recovery, the inability to do a usual job and a two-physician rule are not part of that definition.

29. Noor, 49, applied for a Canada Pension Plan disability pension on June 1, 2026. Medical evidence confirms a severe and prolonged disability that began in January 2024, and she meets the contribution requirements. Under section 42 of the Canada Pension Plan, what is the earliest time at which she can be deemed to have become disabled?

1. January 2024, the month the disability actually began
2. March 2025, fifteen months before her application
3. June 2024, twenty-four months before her application
4. June 2025, twelve months before her application

Paragraph 42(2)(b) of the Canada Pension Plan says a person cannot be deemed to have become disabled “earlier than fifteen months before the time of the making of any application”. Fifteen months before June 1, 2026 is March 2025, so the actual start in January 2024 and the 24-month date are too early, and the 12-month date is not the earliest permitted time.

30. Hana, 50, has been found to have a severe and prolonged disability and applies for a Canada Pension Plan disability pension. She made base contributions on earnings not less than the basic exemption in four of the last six calendar years of her contributory period. Ignoring the 25-year alternative, does she meet the minimum qualifying period under subsection 44(2) of the Canada Pension Plan?

1. No, because every one of the last six calendar years must qualify
2. Yes, because four of the last six calendar years is enough
3. No, because five of the last six calendar years are required
4. Yes, but she must also have reached the age of sixty

Subparagraph 44(2)(a)(i) of the Canada Pension Plan treats a contributor as having met the minimum qualifying period if base contributions were made on earnings not less than the basic exemption for at least four of the last six calendar years. Hana has four, so she qualifies; requiring five or all six overstates the test, and paragraph 44(1)(b) sets no age-60 condition, only that the contributor has not reached 65.

31. Li Wei, 63, has received a Canada Pension Plan retirement pension for two years while working part-time. She then becomes disabled, can no longer work, and has made base contributions for the minimum qualifying period, which ends after 2018. Which Canada Pension Plan benefit is designed for her situation?

1. A disability pension for a contributor who has no retirement pension
2. A survivor's pension for the spouse of a deceased contributor
3. A child's benefit for the children of a disabled contributor
4. A post-retirement disability benefit for a retirement pension recipient

Paragraph 44(1)(h) of the Canada Pension Plan provides a post-retirement disability benefit to a retirement pension beneficiary who has not reached 65 and is disabled, if the contribution conditions are met. The ordinary disability pension in paragraph 44(1)(b) is payable only to a contributor “to whom no retirement pension is payable”, and the survivor's pension and child's benefit depend on a death or on a disabled contributor's children, not on a retiree's own disability.

32. Under subsection 56(1) of the Canada Pension Plan, the basic monthly amount of a disability pension is a flat rate benefit plus what percentage of the contributor's retirement pension, as calculated under the Plan?

1. 50% of that pension
2. 90% of that pension
3. 75% of that pension
4. 100% of that pension

Paragraph 56(1)(b) of the Canada Pension Plan sets the second component at 75% of the amount of the contributor's retirement pension, calculated under subsections 56(3), (3.1) and (3.2); the first component is the flat rate benefit in paragraph 56(1)(a). The other percentages are not the figure used in paragraph 56(1)(b).

33. Which of the following is NOT a characteristic of creditor's group insurance as described in CLHIA Guideline G7?

1. The amount of insurance may not exceed the Indebtedness
2. Enrolment must be clearly distinct from the credit transaction
3. Benefits are paid to the debtor's family as income replacement
4. The insurance is voluntary and the debtor may cancel it when they wish

Clause 10(3)(i) on page 8 of CLHIA Guideline G7 requires the certificate to state that benefits will be paid to the Creditor to reduce or extinguish the unpaid Indebtedness, so this insurance protects the lender, not the debtor's family. Subsection 5(1) on page 4 limits the amount to the Indebtedness, subsection 9(3) on page 5 requires enrolment to be clearly distinct from the credit transaction, and clauses 9(6)(c) and (e) on page 6 require statements that the insurance is voluntary and can be cancelled at any time.

34. Kofi's employer offers a group long-term disability plan. Kofi pays the entire premium himself, the employer makes no contribution to the plan, and he later receives $2,400 per month in disability benefits. How are those benefits treated for income tax?

1. They are taxable for the part above the premiums that Kofi paid
2. They are not taxable, because the employer contributed nothing to the plan
3. They are taxable in full, because they replace lost employment income
4. They are taxed as a Canada Pension Plan benefit under paragraph 56(1)(a)

Paragraph 6(1)(f) of the Income Tax Act includes disability plan benefits in income only for a plan to which the employer “has made a contribution”, and then only to the extent that the benefits exceed the employee's own contributions. Kofi's employer contributed nothing, so nothing is included under that paragraph. Subparagraph 56(1)(a)(i) taxes Canada Pension Plan benefits, which a private plan does not pay.

35. Consider the following statements about the income tax treatment of benefits received during a disability: 1. Canada Pension Plan benefits are included in income under subparagraph 56(1)(a)(i) of the Income Tax Act. 2. Employment Insurance benefits under Part I of the Employment Insurance Act are included in income under subparagraph 56(1)(a)(iv). 3. Under paragraph 6(1)(f), benefits from an employer-contributed disability plan are included only to the extent that they exceed the employee's own contributions. 4. Employment Insurance sickness benefits are not taxable, because the government pays them. Which statements are correct?

1. 1 and 2
2. 1 and 3
3. 2 and 4
4. 1, 2 and 3

Subparagraph 56(1)(a)(i) of the Income Tax Act includes Canada Pension Plan benefits in income, and subparagraph 56(1)(a)(iv) includes benefits under Part I of the Employment Insurance Act, so statement 4 is wrong. Paragraph 6(1)(f) includes benefits from a plan to which the employer contributed only to the extent that they exceed the employee's contributions. Statements 1, 2 and 3 are therefore correct.