LLQP Segregated Funds & Annuities · Component 4.2 · 10% of the exam
An insurer is settling a segregated fund death claim where the market value has fallen below the deposits. The death benefit is calculated as:
- AThe deposits only, since the guarantee returns what was invested and any growth belongs to the insurer
- The greater of market value at notice of death and the guaranteed death benefit, adjusted for withdrawals
- CThe guaranteed amount only, since the death benefit is the insurance feature and market value is irrelevant
- DThe lesser of market value and the guarantee, since the insurer pays the amount that limits its exposure under the contract
Correct answer: B) The greater of market value at notice of death and the guaranteed death benefit, adjusted for withdrawals
The valuation date for the death benefit is set by contract — often the date of notification, not the date of death. Explaining this to beneficiaries manages expectations.
Why the other options are wrong
- AGrowth is included if market value is higher.
- CMarket value applies if higher than the guarantee.
- DThe death benefit is the greater of the two amounts, never the lesser.
Exam tip
Death benefit = greater of market value (contract valuation date) and guaranteed amount.
Common mistake
Assuming the death benefit is valued on the date of death.
What this tests
CISRO competency component 4.2 — Provide customer service during the validity period of the coverage — which is weighted at 10% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 4
- A client's daughter was born last month and the client wants her added to the segregated fund designation. The agent should:
- A client wants to withdraw part of his segregated fund before maturity. The agent should explain:
- A client's segregated fund contract is approaching its maturity date. The insurer will:
- A client asks to add her adult son as a joint owner of her non-registered segregated fund contract. The agent should explain that:
- A client wants to replace the beneficiary on a contract where the current designation was made irrevocable. The agent must explain that:
- A client who has lost her job asks to pause her pre-authorized monthly contributions for six months. The agent should:
Practice the whole Segregated Funds & Annuities module
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