LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client holds an old deferred annuity with a guaranteed interest rate well above what is available today. The agent should:
- Arecommend surrendering it and reinvesting the proceeds in a current segregated fund contract
- Btransfer the contract to another insurer offering a higher commission on the new deposit
- confirm the guaranteed terms in writing and generally advise keeping the existing contract
- Dtell the client that old contracts are void once the rates they promise become uncompetitive
Correct answer: C) confirm the guaranteed terms in writing and generally advise keeping the existing contract
A contractual rate above today's market is a valuable asset that cannot be replaced. The agent should verify the terms with the insurer, explain their worth and keep a record of the advice given rather than encouraging a replacement.
Why the other options are wrong
- ASurrendering a superior guaranteed rate would leave the client measurably worse off.
- BRecommending a transfer for commission reasons is a plain conflict of interest.
- DAn insurer remains bound by the terms of a contract it issued regardless of market rates.
Exam tip
An above-market guaranteed rate is almost never worth replacing.
Common mistake
Judging an old contract by its age or its fees rather than by its guarantees.
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.