LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A deferred annuity:
- APays income at once from the date of deposit, with the amount fixed for the client's lifetime
- BHas no accumulation phase, since the deposit is converted to income units on the day it is received by the insurer
- Accumulates during a deferral period, then converts to income; it usually has a surrender value first
- DIs a life insurance policy with a savings element that pays a death benefit rather than income
Correct answer: C) Accumulates during a deferral period, then converts to income; it usually has a surrender value first
Deferred annuities are accumulation vehicles with an income option. Non-registered deferred annuities are taxed on accrual annually.
Why the other options are wrong
- AThat describes an immediate annuity.
- BAccumulation is its defining phase.
- DIt is an annuity contract, not life insurance.
Exam tip
Deferred annuity: accumulate, then annuitize; cash value during deferral.
Common mistake
Assuming a deferred annuity's accumulation is tax-free outside a registered plan.
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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