LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A client with a very large sum to annuitize asks what happens if the insurer fails. The agent should explain that:
- Aannuity payments carry no protection at all, so the client must accept the insurer's credit risk
- Assuris protects annuity payments up to a stated limit, so splitting across insurers can help
- Cthe federal government guarantees annuity payments in full whatever the amount involved
- Dthe Canada Deposit Insurance Corporation covers annuity contracts on the same basis as deposits
Correct answer: B) Assuris protects annuity payments up to a stated limit, so splitting across insurers can help
Assuris provides protection for policyholders of member life insurers up to defined limits. A client committing a very large amount can reduce exposure by dividing the purchase between two insurers so that more of the income falls within the limits.
Why the other options are wrong
- AProtection does exist through Assuris, subject to the limits that apply.
- CThe federal government does not guarantee life insurance or annuity contracts.
- DDeposit insurance covers bank deposits, not insurance company contracts.
Exam tip
Large annuity purchases raise Assuris limits; splitting among insurers is the standard fix.
Common mistake
Confusing Assuris with deposit insurance when explaining protection to a client.
What this tests
CISRO competency component 2.3 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
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