LLQP Segregated Funds & Annuities · Component 4.1 · 10% of the exam
A client with a guaranteed minimum withdrawal benefit contract asks to take more than the permitted annual amount. The agent must warn that:
- Athe excess is simply paid from the guaranteed base without any lasting consequence
- the excess withdrawal can reduce the guaranteed base and shrink all future payments
- Cthe guaranteed base increases to reflect the larger withdrawal the client has chosen
- Dthe insurer will refuse any request above the annual amount stated in the contract
Correct answer: B) the excess withdrawal can reduce the guaranteed base and shrink all future payments
These contracts promise a set withdrawal each year for as long as the base lasts. Taking more usually reduces the base proportionally to the market value, which permanently lowers the guaranteed income the client can draw.
Why the other options are wrong
- AAn excess withdrawal has a lasting effect on the guaranteed income stream.
- CWithdrawing more reduces the base rather than increasing it.
- DThe withdrawal is usually permitted; it is the consequence that must be disclosed.
Exam tip
Excess withdrawal on a guaranteed withdrawal contract equals a permanent cut in income.
Common mistake
Processing an extra withdrawal without explaining the effect on the guaranteed base.
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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