LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client in poor health with a shortened life expectancy is considering a life annuity. The agent should mention that:
- Ainsurers refuse to issue life annuities to anyone whose health is less than fully satisfactory
- Ba medical examination will reduce the payment offered, since the insurer prices in extra risk
- Cthe client should buy a term-certain annuity instead, as health never affects annuity pricing
- an impaired or enhanced annuity may pay more, because the expected payment period is shorter
Correct answer: D) an impaired or enhanced annuity may pay more, because the expected payment period is shorter
An enhanced annuity uses medical evidence showing a shorter expected lifetime, which lets the insurer offer a higher monthly payment for the same purchase amount. Not every insurer offers one, so quotations should be sought from several.
Why the other options are wrong
- APoor health does not disqualify an applicant; it can actually improve the offer.
- BOn an annuity, shorter life expectancy raises the payment rather than lowering it.
- CHealth affects pricing on enhanced annuities, which is the point of seeking one.
Exam tip
Annuity underwriting works in reverse: worse health means a higher payment.
Common mistake
Applying life insurance underwriting logic to an annuity quotation.
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
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