LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A 70-year-old bachelor with no heirs wants the highest possible monthly income. A straight life annuity with no guarantee period:
- Provides the highest income per dollar but pays nothing after the annuitant dies, even soon after purchase
- BPays for a minimum of 20 years, so the beneficiary receives the balance if the annuitant dies early in the term
- CIs the safest option for the family, since the insurer bears all of the longevity risk
- DPays the estate the unrecovered balance of the premium at death
Correct answer: A) Provides the highest income per dollar but pays nothing after the annuitant dies, even soon after purchase
The absence of a guarantee period maximizes income but exposes the estate to early death. Most clients add a guarantee period.
Why the other options are wrong
- BNo minimum period applies without a guarantee.
- CIt is riskiest for the estate.
- DNothing is paid at death.
Exam tip
Straight life = highest income, no death benefit.
Common mistake
Selling a straight life annuity without explaining the early-death risk.
What this tests
CISRO competency component 2.3 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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