LLQP Segregated Funds & Annuities · Component 2.3 · 30% of the exam
'Annuitization' of a segregated fund contract at maturity means:
- AThe guarantee is lost, since the contract has been converted into a different product
- BThe contract is cancelled and the client must open a new annuity contract to receive income
- The contract value, or the guaranteed amount if higher, is converted to an annuity by default
- DThe funds are returned to the client in cash, less the deferred sales charge that still applies
Correct answer: C) The contract value, or the guaranteed amount if higher, is converted to an annuity by default
Seg fund contracts are technically deferred annuities; at maturity the client may take cash, renew or annuitize. Insurers notify before maturity.
Why the other options are wrong
- AThe guarantee is applied at maturity before conversion.
- BIt continues as an annuity under the same contract.
- DCash is an option, not the default.
Exam tip
Seg fund maturity: cash, renew, or annuitize (default).
Common mistake
Missing the maturity notice and defaulting into annuitization.
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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