LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
A beneficiary asks whether they must accept the death benefit as a lump sum. The agent should explain:
- AIt is forfeited if not taken at once, since the insurer's obligation ends when the lump sum is offered and declined by the beneficiary
- If the owner elected a settlement option it is paid as elected; otherwise a lump sum or annuity settlement is usually available
- COnly an annuity is available, since insurers do not pay death benefits in cash under segregated fund contracts
- DYes, always, since the contract specifies a single payment and the insurer cannot vary its terms
Correct answer: B) If the owner elected a settlement option it is paid as elected; otherwise a lump sum or annuity settlement is usually available
Settlement options exist at both owner and beneficiary level. Interest earned on settlements is taxable.
Why the other options are wrong
- AA death benefit is never forfeited for not being taken immediately.
- CA lump sum is available unless the owner restricted it.
- DSettlement options exist beyond a lump sum.
Exam tip
Settlement options at claim: owner's election governs; else beneficiary may choose.
Common mistake
Failing to mention annuity settlement options to a beneficiary.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 4
- A client's daughter was born last month and the client wants her added to the segregated fund designation. The agent should:
- A client wants to withdraw part of his segregated fund before maturity. The agent should explain:
- A client's segregated fund contract is approaching its maturity date. The insurer will:
- A client asks to add her adult son as a joint owner of her non-registered segregated fund contract. The agent should explain that:
- A client wants to replace the beneficiary on a contract where the current designation was made irrevocable. The agent must explain that:
- A client who has lost her job asks to pause her pre-authorized monthly contributions for six months. The agent should:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.