LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
A client gives the insurer no instructions as her contract reaches its maturity date. The insurer will typically:
- Apay the entire contract value out in cash and close the account without further notice
- Bcontinue the existing guarantee indefinitely until the holder chooses to give an instruction
- apply the contract's default provision, such as renewing the term or moving to a set fund
- Dconvert the contract into a life annuity beginning immediately at the prevailing rates
Correct answer: C) apply the contract's default provision, such as renewing the term or moving to a set fund
Contracts set out what happens if the holder is silent, often a new guarantee term or a transfer to a specified fund. The agent should contact the client in advance so the outcome is chosen rather than defaulted into.
Why the other options are wrong
- AA forced payout is not the usual default and would create an unwanted tax event.
- BThe guarantee does not simply continue without a new term being started.
- DAutomatic annuitization is not how modern contracts typically handle silence.
Exam tip
Every contract has a maturity default; contact the client before it applies.
Common mistake
Leaving a client to discover the default after the maturity date has passed.
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.