LLQP Segregated Funds and Annuities 4

Question 1

A client's segregated fund contract matures and the market value is below the guarantee amount. Who bears the cost of the maturity guarantee shortfall?

Accepted Answer

The insurance company

Answer

The insurance company bears the cost of making up the shortfall between the market value and the guaranteed maturity amount.

Question 2

Which feature of a segregated fund contract allows a beneficiary to bypass the estate and receive proceeds directly upon the annuitant's death?

Accepted Answer

Named beneficiary designation

Answer

A named beneficiary designation allows death benefit proceeds to pass directly to the beneficiary, bypassing the estate and avoiding probate.

Question 3

A life annuity with a 10-year guarantee period pays out for life but guarantees payments for at least 10 years. If the annuitant dies after 3 years, how many more years will payments continue to a beneficiary?

Accepted Answer

7 years

Answer

Since 3 of the 10 guaranteed years have elapsed, payments will continue to the beneficiary for the remaining 7 years.

Question 4

What distinguishes a variable annuity from a fixed annuity?

Accepted Answer

Variable annuity payments fluctuate based on investment performance

Answer

Variable annuity payments fluctuate because they are linked to the performance of underlying investment sub-accounts.

Question 5

A segregated fund's Management Expense Ratio (MER) is typically higher than a comparable mutual fund MER because it includes:

Accepted Answer

The cost of insurance guarantees

Answer

Segregated funds carry a higher MER than mutual funds primarily because the MER includes the cost of the insurance guarantee features.

LLQP - Life License Qualification Program Practice Test

LLQP - Life License Qualification Program Practice Test

LLQP Segregated Funds and Annuities 4