LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
For a business owner client, holding investments in a segregated fund rather than a brokerage account may add:
- ANothing, since the investments and their returns are identical in either account
- Potential creditor protection, probate bypass and a death benefit guarantee
- CHigher guaranteed returns, since the insurer credits a minimum rate to business clients
- DTax-free income, since allocations from an insurance contract are not reported to the CRA
Correct answer: B) Potential creditor protection, probate bypass and a death benefit guarantee
The advantages are structural, not return-based. Disclosure of the fee premium and the limits of creditor protection is essential.
Why the other options are wrong
- AStructural benefits exist beyond the investments.
- CSegregated funds never guarantee a rate of return.
- DIncome allocated from a non-registered segregated fund is taxable.
Exam tip
Business owner: creditor protection, probate bypass, death guarantee — with limits.
Common mistake
Overstating creditor protection as absolute.
What this tests
CISRO competency component 2.2 — 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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