LLQP Segregated Funds and Annuities 2

Question 1

What is the minimum maturity guarantee required by Canadian insurance regulators for segregated fund contracts?

Accepted Answer

75% of deposits

Answer

Canadian insurance regulators require a minimum maturity guarantee of 75% of deposits, though many contracts offer 100% guarantees.

Question 2

What is the 'reset' feature in a segregated fund contract?

Accepted Answer

The ability to lock in market gains by resetting the guarantee amount to the current market value

Answer

The reset feature allows contract holders to lock in investment gains by resetting the guarantee amount to the current higher market value, starting a new guarantee period.

Question 3

How are segregated fund death benefit proceeds treated for estate planning purposes in Canada?

Accepted Answer

They can bypass probate and pass directly to the named beneficiary

Answer

Segregated fund proceeds paid to a named beneficiary bypass the estate and probate process, providing faster distribution and potential probate fee savings.

Question 4

What is a 'life annuity' and how does it provide retirement income?

Accepted Answer

A contract that provides guaranteed periodic income payments for the annuitant's lifetime

Answer

A life annuity converts a lump sum into guaranteed periodic income payments that continue for the annuitant's entire lifetime, regardless of how long they live.

Question 5

What is the key difference between a segregated fund and a mutual fund in terms of creditor protection?

Accepted Answer

Segregated funds may offer creditor protection when a family-class beneficiary is named, while mutual funds generally do not

Answer

Segregated funds, as insurance contracts, may provide creditor protection when a family-class beneficiary is named, while mutual funds as securities generally do not offer this protection.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP Segregated Funds and Annuities 2