LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
An annuity is:
- A contract under which an insurer pays periodic income for a term or for life in exchange for a premium
- BA loan from the client to the insurer, repaid with interest over a fixed number of years in equal monthly instalments
- CA mutual fund that distributes its income to unitholders on a monthly schedule
- DA deposit account from which the client withdraws a set amount each month until it is empty
Correct answer: A) A contract under which an insurer pays periodic income for a term or for life in exchange for a premium
Annuities convert capital into income. Life annuities pool longevity risk; term-certain annuities pay for a fixed period.
Why the other options are wrong
- BThe client gives capital; the insurer owes income, not a loan repayment.
- CMutual funds are investment pools, not income contracts.
- DA deposit returns principal on demand; an annuity returns it as income.
Exam tip
Annuity = capital in, guaranteed periodic income out.
Common mistake
Confusing an annuity with a RRIF.
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
Timed sets weighted like the exam, and review of every question you miss. Free to start.