LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client asks why the annuity quote she received last month is no longer available. The agent should explain that:
- Aquotes are guaranteed for a full calendar year from the date they are first prepared
- annuity rates move with interest rates, and a quote holds only for a short stated period
- Cthe insurer changed her health classification after reviewing her medical file again
- Dthe quote lapsed because she did not complete an investment knowledge questionnaire in time
Correct answer: B) annuity rates move with interest rates, and a quote holds only for a short stated period
An annuity payment depends on the interest rate the insurer can earn when the money is received, along with the annuitant's age and the options chosen. Quotes are therefore valid only briefly and are struck when the funds settle.
Why the other options are wrong
- ANo insurer holds an annuity rate open for a year; the interest rate risk is too great.
- COrdinary annuities are not medically underwritten unless an enhanced annuity is sought.
- DNo questionnaire governs the validity period of an annuity quotation.
Exam tip
Annuity income is set by rates on the settlement date, so quotes expire quickly.
Common mistake
Promising a client that a quoted annuity payment will still be available weeks later.
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.