LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client asks whether he can cancel his life annuity in two years if his circumstances change. The agent should tell him that:
- Acancellation is available once a year on the contract anniversary, subject to a modest charge
- Bannuities may be cancelled at any time with the market value returned to the annuitant
- Ccancellation is automatic whenever the annuitant's income needs are shown to have changed
- a life annuity is generally irrevocable once payments begin, so the decision is permanent
Correct answer: D) a life annuity is generally irrevocable once payments begin, so the decision is permanent
Annuitization exchanges capital for a stream of payments, and the insurer prices the promise on that basis. Because the contract cannot normally be undone, the client should annuitize only the portion of savings not needed for flexibility.
Why the other options are wrong
- ALife annuities do not offer an annual cancellation window.
- BThere is no market value to return; the capital has been exchanged for the payments.
- CA change in circumstances does not give a right to unwind the contract.
Exam tip
Annuitize only what the client can afford to lock away permanently.
Common mistake
Annuitizing a client's entire savings and leaving no accessible reserve.
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
Timed sets weighted like the exam, and review of every question you miss. Free to start.