Segregated Funds and Annuities Flashcards

What is Assuris and what role does it play in protecting segregated fund contract holders?

Answer: The industry compensation corporation that protects policyholders if a life insurance company becomes insolvent

Assuris is the not-for-profit corporation that protects Canadian policyholders if their life insurance company becomes insolvent, covering segregated fund guarantees up to specified limits.

What is a 'term certain annuity' and how does it differ from a life annuity?

Answer: An annuity that pays for a fixed period of years regardless of whether the annuitant survives

A term certain annuity pays for a specified number of years regardless of survival, while a life annuity pays for the annuitant's entire lifetime.

What management fees are typically associated with segregated funds and how do they compare to mutual funds?

Answer: Segregated funds typically have higher MERs than comparable mutual funds due to the cost of guarantees

Segregated fund MERs are typically higher than comparable mutual funds because the fee includes the cost of providing maturity and death benefit guarantees.

What is the 'maturity date' in a segregated fund contract and why is it significant?

Answer: The date on which the maturity guarantee is assessed and the contract holder receives at least the guaranteed amount

The maturity date is when the maturity guarantee is assessed; if the market value is below the guaranteed amount, the insurer tops up the difference.

How does a 'joint and last survivor' annuity work?

Answer: Income payments continue as long as either of two annuitants is alive, often at a reduced rate after the first death

A joint and last survivor annuity provides income to both annuitants and continues (often at a reduced rate) to the surviving annuitant after the first death.

What suitability considerations should an agent assess before recommending segregated funds to a client?

Answer: The client's investment objectives, risk tolerance, time horizon, financial situation, and need for guarantee features

Agents must assess multiple suitability factors including investment objectives, risk tolerance, time horizon, financial situation, and whether the guarantee features justify the higher costs.