LLQP Segregated Funds & Annuities · Component 3.2 · 25% of the exam
A client names her only sister as beneficiary and asks what happens if the sister dies before her. The agent should recommend:
- Aleaving the question open, since the insurer will simply choose the nearest surviving relative
- Breviewing the designation annually instead, which removes the need for any contingent name
- naming a contingent beneficiary so that the proceeds still bypass the estate in that event
- Dnaming the estate as beneficiary from the outset to keep the arrangement simple
Correct answer: C) naming a contingent beneficiary so that the proceeds still bypass the estate in that event
If the only named beneficiary dies first and no contingent is named, the proceeds fall into the estate, attracting probate and delay. A contingent designation preserves the direct payment and the privacy the client wanted.
Why the other options are wrong
- AAn insurer does not select a beneficiary; the proceeds go to the estate.
- BAn annual review cannot help if the beneficiary dies between reviews.
- DNaming the estate gives up probate bypass and creditor protection from the start.
Exam tip
A single named beneficiary should almost always have a contingent behind them.
Common mistake
Recording one beneficiary and never discussing what happens if they die first.
What this tests
CISRO competency component 3.2 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 3
- A client's spouse must sign for:
- When the insurer requests additional information after the application (for example, source of wealth for a large deposit), the agent should:
- The implementation of a recommendation involving a switch from one seg fund to another within a contract requires:
- A client wishes to designate a charity as beneficiary of a segregated fund. Implementation should:
- For a deferred annuity implemented for a client, the agent should confirm:
- The agent's record of the implementation should be retained:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.