LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing coverage includes a universal life policy with a large cash value. For investment assessment, the agent should:
- Include the tax-sheltered cash value in the asset picture and understand its role
- BTreat it as a GIC, since the cash value earns a fixed rate and carries no market risk
- CRecommend surrendering it, since a segregated fund offers better growth for the same money
- DLeave it out of the assessment, since life insurance is a protection product rather than an investment
Correct answer: A) Include the tax-sheltered cash value in the asset picture and understand its role
Insurance cash values are part of net worth and have distinct tax advantages. Recommendations should complement them.
Why the other options are wrong
- BIt has its own features, tax treatment and role.
- CSurrender may trigger tax and lose coverage.
- DIt is a significant asset that shapes the recommendation.
Exam tip
Count insurance cash values in the asset picture.
Common mistake
Recommending surrender of a tax-sheltered policy to fund a seg fund.
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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