LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
An 'indexed' annuity:
- Increases payments annually by a fixed percentage or inflation, starting from a lower initial payment
- BPays a level amount forever, with the insurer absorbing all inflation risk on the client's behalf for the life of the contract
- CDecreases each year, so that the client receives more income in the early years of retirement
- DIs linked to a stock index, so payments rise and fall with the market each year
Correct answer: A) Increases payments annually by a fixed percentage or inflation, starting from a lower initial payment
Indexing addresses inflation risk over a long retirement at the cost of lower early income.
Why the other options are wrong
- BThat describes a level annuity.
- CIndexed payments rise; they do not decrease by design.
- D'Indexed' here means inflation-adjusted, not market-linked.
Exam tip
Indexed annuity: lower start, rising payments; inflation protection.
Common mistake
Comparing an indexed annuity's first payment with a level annuity's without noting the growth.
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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