LLQP (Life Licence Qualification Program) Practice Exam · Question
In the context of Universal Life insurance and tax-exempt status, what does the 'Level Percentage Premium' (LPP) or the 'Maximum Tax Actual' (MT) limit determine?
The LPP is the maximum premium that can be paid into a policy while maintaining its status as an 'exempt' policy under the Income Tax Act. If the policy values
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Question: In the context of Universal Life insurance and tax-exempt status, what does the 'Level Percentage Premium' (LPP) or the 'Maximum Tax Actual' (MT) limit determine?
Answer options:
- The minimum premium required to keep a term insurance policy in force.
- The commission rate paid to the agent over the life of the policy.
- The amount of the death benefit that is tax-free to a corporation. ✅ The maximum premium allowed to maintain the policy's tax-exempt status.
Correct answer: The maximum premium allowed to maintain the policy's tax-exempt status.
Explanation: The LPP is the maximum premium that can be paid into a policy while maintaining its status as an 'exempt' policy under the Income Tax Act. If the policy values exceed the MT limit, it becomes 'non-exempt' and the annual accrual of income is taxed.
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- A life insurance policy that offers lifelong coverage, a guaranteed death benefit, and a savings component tha
- Group benefits in Canada commonly include:
- Sarah, a 35-year-old marketing professional in Ontario, purchases a participating whole life insurance policy
- Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insur
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