LLQP Segregated Funds & Annuities · Component 4.1 · 10% of the exam
A client requests a withdrawal that would leave less than the contract's minimum balance. The agent should explain that the insurer may:
- close the contract and pay out the remaining value, ending the guarantees on it
- Brefuse the withdrawal entirely and require the client to keep the contract fully invested
- Cincrease the management fee on the remaining balance until the minimum is restored
- Dwaive the minimum permanently, since minimum balance rules are guidance rather than terms
Correct answer: A) close the contract and pay out the remaining value, ending the guarantees on it
Contracts set a minimum to keep administration worthwhile. A withdrawal that breaches it often results in the balance being paid out and the contract terminated, which ends the guarantees the client has been paying for.
Why the other options are wrong
- BInsurers generally allow the withdrawal and close the contract rather than refusing.
- CFees are set by the fund and are not raised as a penalty on a small balance.
- DThe minimum is a contract term, not optional guidance.
Exam tip
A withdrawal that breaches the minimum can terminate the contract and its guarantees.
Common mistake
Processing a large withdrawal without checking the contract's minimum balance.
What this tests
CISRO competency component 4.1 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 4
- A client's daughter was born last month and the client wants her added to the segregated fund designation. The agent should:
- A client wants to withdraw part of his segregated fund before maturity. The agent should explain:
- A client's segregated fund contract is approaching its maturity date. The insurer will:
- A client asks to add her adult son as a joint owner of her non-registered segregated fund contract. The agent should explain that:
- A client wants to replace the beneficiary on a contract where the current designation was made irrevocable. The agent must explain that:
- A client who has lost her job asks to pause her pre-authorized monthly contributions for six months. The agent should:
Practice the whole Segregated Funds & Annuities module
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