LLQP Segregated Funds & Annuities · Component 3.1 · 25% of the exam
A client asks whether to buy a level or indexed annuity. The recommendation should weigh:
- Age and horizon, other indexed income, the lower initial payment, and whether prescribed treatment matters
- BNothing in particular, since the two forms pay the same total over the annuitant's expected lifetime
- COnly the insurer's preference, since insurers price the indexed form to steer clients to the one they favour
- DOnly the first payment, since a client should always take the form that pays the most from the start
Correct answer: A) Age and horizon, other indexed income, the lower initial payment, and whether prescribed treatment matters
Indexing trades early income for inflation protection and may cost prescribed tax status non-registered.
Why the other options are wrong
- BIt is a real trade-off with different outcomes.
- CThe client's needs govern.
- DThe first payment misleads; indexed payments grow.
Exam tip
Indexed: long horizon, little other indexed income; note prescribed tax loss.
Common mistake
Recommending an indexed non-registered annuity without noting accrual taxation.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.