LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client shows the agent a contract bought years ago with a 75/75 guarantee and believes it is fully protected. The assessment should note:
- That 75% of deposits is guaranteed at maturity and death, leaving 25% exposed
- BThat the contract is fully guaranteed, since 75/75 refers to the two dates on which the guarantee applies
- CThat it pays 75% of deposits annually as income for as long as the contract remains in force
- DThat the market value cannot decline, since the insurer holds 75% of each deposit in reserve
Correct answer: A) That 75% of deposits is guaranteed at maturity and death, leaving 25% exposed
Guarantee levels are expressed as maturity/death percentages. Understanding the existing level is part of assessing existing coverage.
Why the other options are wrong
- BOnly 75% of deposits is guaranteed, not the whole amount.
- CThe percentage is of deposits at maturity or death, not an annual payment.
- DMarket value can decline; the guarantee applies only at maturity or death.
Exam tip
75/75 = 75% at maturity, 75% at death. 75/100 and 100/100 cost more.
Common mistake
Confusing the guarantee percentage with a return.
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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