LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A beneficiary asks whether the death benefit on a segregated fund is payable when the annuitant died by suicide a year after the contract was issued. The agent should explain that:
- the benefit is payable, because the contract is an investment rather than life insurance
- Bthe benefit is reduced to the deposits made, with all investment growth withheld by the insurer
- Cno benefit is payable, since every insurance contract excludes suicide in the first two years
- Dpayment depends on a medical review of the annuitant's history conducted by the insurer
Correct answer: A) the benefit is payable, because the contract is an investment rather than life insurance
A segregated fund is an investment contract with an insurance guarantee, not a life insurance policy issued on evidence of insurability. The suicide exclusion found in life policies does not apply, and the death benefit is calculated in the usual way.
Why the other options are wrong
- BThe benefit is the higher of market value and the adjusted guarantee, with no forfeiture.
- CThe two-year suicide provision belongs to life insurance policies, not fund contracts.
- DNo medical review governs entitlement under a segregated fund contract.
Exam tip
Segregated funds carry no suicide clause because they are not life insurance policies.
Common mistake
Applying life insurance policy exclusions to a segregated fund death benefit.
What this tests
CISRO competency component 2.2 — 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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