LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client has an insurance contract with an irrevocable beneficiary and now wants to use it as loan collateral. The review should note:
- AThat an irrevocable designation prevents the contract from ever being used as security for a loan
- BThat the lender's interest automatically overrides the irrevocable designation on registration
- CThat the designation lapses once the contract has been held for more than ten years
- That the irrevocable beneficiary's written consent is required before the contract can be assigned
Correct answer: D) That the irrevocable beneficiary's written consent is required before the contract can be assigned
An irrevocable designation vests an interest in the beneficiary, so the owner cannot assign, withdraw or surrender without that person's agreement.
Why the other options are wrong
- AAssignment is possible with the beneficiary's consent.
- BA lender takes subject to the beneficiary's vested interest.
- CIrrevocable designations do not expire with time.
Exam tip
Irrevocable means the owner needs permission.
Common mistake
Promising a client full control over a contract with an irrevocable beneficiary.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
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