- (Topic 3)
Brian is a machinist. For the past seven years, he??s worked for a company that offers a group benefits plan. Under that plan, the premiums for long-term disability coverage are entirely paid by the employees. Last year, an injury forced Brian to stop working for eight months. After a four-month waiting period, during which he collected Employment Insurance (EI) benefits, Brian received long-term disability (LTD) benefits from the group plan??s insurer. Brian is now preparing his income tax return and wonders about the tax implications of the different benefits he received while on disability. What statement accurately describes the tax treatment of Brian??s EI and LTD benefits?

Correct Answer:B
Comprehensive and Detailed Explanation:
EI benefits are taxable as income under Canadian law. LTD benefits are tax-free if the employee pays 100% of the premiums, as in Brian??s case (Chapter 8:Group Plan Specifics).
Option A: Incorrect; LTD is tax-free here. Option B: Correct; EI taxable, LTD tax-free. Option C: Incorrect; EI is taxable.
Option D: Incorrect; EI is taxable.
Reference: LLQP Accident and Sickness Insurance Manual, Chapter 8:Group Plan Specifics.

- (Topic 1)
Alana, Meaghan, and Beatrice are equal shareholders of Advanced Tech Inc. They each own 100 shares of the company. Each share is currently worth $5,000. They recently signed a cross-purchase buy-sell agreement that is funded by life insurance. What will happen under this agreement if Alanadies today?

Correct Answer:D
In a cross-purchase buy-sell agreement funded by life insurance, each shareholder purchases a life insurance policy on the lives of the other shareholders. Upon the death of a shareholder, the surviving shareholders use the proceeds from the insurance to buy out the deceased shareholder??sshares at the agreed value. Since each share is valued at $5,000, Alana's 100 shares would be worth:
100 shares??5,000=500,000100 \text{ shares} \times 5,000 = 500,000100 shares??5,000=500,000
Thus, Meaghan and Beatrice would collectively purchase Alana's shares from her estate, providing her estate with a total of$500,000. Each surviving shareholder will then own an additional 50 shares, resulting in each now holding 150 shares of Advanced Tech Inc. This option aligns with the principles of cross-purchase agreements discussed in the LLQP.

- (Topic 2)
Nine months ago, Osvaldo was instructed by his insurance agent, Jane, to write a cheque to renew his life insurance. Jane put the cheque in her wallet. She lost her wallet the very same day and completely forgot about Osvaldo??s payment. Some time later, Osvaldo died in a tragic car accident. His family made a claim for the death benefit, but was denied because the policy had lapsed. Who will have to compensate Osvaldo??s family for the loss of death benefit?

Correct Answer:B
Comprehensive and Detailed in Depth Explanation with Exact Extract from Documents and Guides:
TheIFSE Ethics and Professional Practice Course (Common Law)explains that agents must carry Errors and Omissions (E&O) insurance to cover financial losses due to negligence or mistakes. Jane??s failure to process Osvaldo??s payment, leading to a lapsed policy, is negligence. E&Ocoverage compensates the family for the lost benefit, not Jane??s personal assets (A), as it??s designed for such errors. The OmbudService (C) mediates disputes but doesn??t pay claims, and the Canadian Council of Insurance Regulators (D) coordinates policy, not compensation. Thus, B is correct.
References:
IFSE Ethics and Professional Practice Course (Common Law), Module 1: Ethics and Professionalism, Section on "Errors and Omissions Insurance."

- (Topic 2)
Dale meets with his last appointment of a busy workday. He is helping his client Larry fill out a disability insurance claim form. Larry suffered a heart attack a week ago and is at home recuperating. Larry will be unable to work for the next 6 months and needs the benefits as soon as possible to cover his expenses. The at-home appointment takes a little longer than scheduled and Dale finds himself rushing to his son??s big hockey tournament. In his haste, he puts Larry??s form in his briefcase and subsequently forgets to submit the form. Which responsibility did Dale breach?

Correct Answer:D
Dale breached his duty of care by failing to submit Larry??s disability claim form in a timely manner. The duty of care requires insurance agents to act diligently and responsibly, ensuring that they prioritize their clients?? needs and act in a timely manner, especially in situations where benefits are urgently needed. By neglecting to submit the form promptly, Dale did not fulfill this responsibility, potentially delaying Larry's benefits during his recovery period.

- (Topic 3)
Juniper, 69, suffered a stroke a few weeks ago which left her partially paralyzed and has severely reduced her mobility. Since the stroke, she is unable to leave her home. She benefits from regular visits from nurses, massage therapists, and housekeepers. Juniper wants to claim the services on her long-term care (LTC) insurance policy and would like to know how the claim will be processed and paid.
Which of the following answers is CORRECT?

Correct Answer:B
Long-term care (LTC) insurance policies with home care benefits typically require the insured to cover the costs upfront and then submit receipts for reimbursement. Juniper, having regular services from nurses, massage therapists, and housekeepers, would need to pay for these services initially and then file a claim for reimbursement of qualifying expenses, as per the terms of her LTC policy. Generally, such policies cover medically necessary services like nursing care, and possibly massage therapy, but may not include housekeeping as a reimbursable expense. This approach ensures that only eligible services as defined by the policy are reimbursed.

- (Topic 4)
Melissa, a La Tranquillit?? representative, is meeting with a client who tells her about something that happened to one of her friends. While she was taking part in an outdoor weekend at Mont-Tremblant Park, a forest fire broke out and one of the participants was never found. The client isabout to take out life insurance with Melissa. She asks Melissa what would happen to her insurance capital in such a situation. What can Melissa tell the client?

Correct Answer:D
Comprehensive and Detailed In-Depth Explanation: In life insurance, a death benefit requires proof of death, typically a death certificate. Under Quebec law (Civil Code, Article 92), if a person disappears and death cannot be immediately confirmed (e.g., no body found), a court can issue a declaratory judgment of death after a waiting period—usually 7 years, or sooner with evidence of peril (e.g., forest fire). The LLQP notes that insurers delay payment until this legal determination, as premature payment risks fraud. Option D correctly states that the beneficiary could receive the face amount after this process. Option A (30-day payment) assumes immediate proof, which isn??t available here. Option B (premium refund) is incorrect, as the contract remains valid, not void. Option C (impossible payment) overstates the issue—payment is possible post-judgment. The Ethics manual mandates advisors to clarify claim processes, especially in uncertain scenarios.
References: Civil Code of Quebec, Article 92; LLQP Module on Claims; Ethics and
Professional Practice (Civil Law) Manual, Section on Death Benefits.
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