LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
A 'variable' or 'equity-indexed' annuity differs from a fixed annuity in that:
- AIt is a GIC whose rate is reset each year according to the performance of an equity index chosen by the client
- BPayments are guaranteed level for life, since the insurer hedges the equity exposure
- CIt has no market exposure, since the index is used only to set the initial payment
- Payments vary with underlying funds or an index, offering growth potential with less certainty
Correct answer: D) Payments vary with underlying funds or an index, offering growth potential with less certainty
Variable income products blend annuity and fund characteristics. GMWB seg funds are the common Canadian form.
Why the other options are wrong
- AA variable annuity is a market-linked contract, not a GIC.
- BPayments vary with fund performance; they are not level.
- CMarket exposure is the point of the product.
Exam tip
Variable annuity ≈ seg fund with income guarantee (GMWB) in Canada.
Common mistake
Promising level payments from a variable product.
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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