LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A 'life annuity with a cash refund at death' compared with one with a '15-year guarantee' differs in that:
- The refund form pays the shortfall against premium; the guarantee form pays the balance of a fixed period
- BThey are identical in effect, since both return the client's premium to the beneficiary at death regardless of when it occurs
- CThe guarantee form pays the premium back in full, while the refund form pays only the interest earned
- DThe refund form pays nothing at death, since the refund applies only to surrenders during the annuitant's life
Correct answer: A) The refund form pays the shortfall against premium; the guarantee form pays the balance of a fixed period
Different death-benefit designs suit different concerns; the agent compares them for the client.
Why the other options are wrong
- BThe two death-benefit designs differ in what and how long they pay.
- CThe guarantee form pays remaining scheduled payments, not the premium.
- DThe refund form pays the shortfall at death.
Exam tip
Refund = premium shortfall; guarantee period = remaining payments.
Common mistake
Assuming a guarantee period always returns the premium.
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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