LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
A contract holder made several withdrawals before dying while the market value sat below the guaranteed amount. The death benefit will be:
- Athe market value alone, because any withdrawal cancels the death benefit guarantee entirely
- the guaranteed amount as reduced by those withdrawals, if higher than the market value
- Cthe highest market value the contract reached at any time during the holder's lifetime
- Dthe original total of the deposits, with the earlier withdrawals ignored in the calculation
Correct answer: B) the guaranteed amount as reduced by those withdrawals, if higher than the market value
Withdrawals reduce the guaranteed amount, usually in proportion to the market value at the time. The insurer compares the reduced guarantee with the market value at death and pays whichever is higher.
Why the other options are wrong
- AWithdrawals reduce the guarantee rather than cancelling it.
- COnly a reset locks in a high value, and only on the dates the contract allows.
- DWithdrawals always reduce the guarantee and cannot be ignored.
Exam tip
Death benefit equals the higher of market value and the withdrawal-adjusted guarantee.
Common mistake
Quoting a death benefit from total deposits without adjusting for withdrawals.
What this tests
CISRO competency component 4.2 — 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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