LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client holds a guaranteed interest option inside a segregated fund contract. Compared with a bank deposit it offers:
- AA higher guaranteed rate in every case, since insurers do not bear the cost of deposit insurance
- BDaily liquidity without penalty, since insurance contracts cannot impose redemption charges
- A beneficiary designation and potential creditor protection, with industry rather than deposit protection
- DFull deposit insurance coverage, since a guaranteed interest option is legally a bank deposit
Correct answer: C) A beneficiary designation and potential creditor protection, with industry rather than deposit protection
The guaranteed rate is comparable, but holding it inside an insurance contract adds the designation and protection features and moves the protection from deposit insurance to the industry compensation body.
Why the other options are wrong
- ARates are competitive but not automatically higher.
- BEarly redemption before the term ends usually carries a charge.
- DInsurance contracts are not deposits and are not covered by deposit insurance.
Exam tip
Same rate, different wrapper, different protection scheme.
Common mistake
Telling a client a guaranteed interest option is covered by deposit insurance.
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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