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How is the value of an interest in a segregated fund expressed?

B. A life insurance agent was taking an application from his neighbour. In the course of completing the application, the neighbour acknowledged that he had a major heart attack five years ago and that he had recently been experiencing chest pains. What course of action should the agent have taken upon completion of the application?

3. Which of the following are valid benefits of investing in units of a segregated fund through a deferred annuity contract?
A. The contract may offer a disability waiver on prescribed premiums, such that the insurer will make the deposits for the policyowner while he or she is disabled.
B. Seg fund contracts offer guaranteed minimum payouts at the death of the annuitant or the policy maturity.
C. Policy proceeds may be paid directly to a named beneficiary, bypassing estate administration and the probate process.
D. The policy values are guaranteed to be protected from creditors of the policyowner should he or she become bankrupt.

2. What happens to a term certain annuity if the annuitant (measuring life) should outlive the guaranteed term?

9. Which of the following is NOT an advantage offered by annuities over term deposits and GICs?

6. When must an “information folder” be provided to the purchaser of a new segregated funds policy?

5. George purchased an accumulation (deferred) annuity contract from the BetYourLife Insurance Company in 2002. The policy called for minimum monthly deposits of $100 ($1,200 a year) and allowed for additional unscheduled deposits of up to $50,000 a year. George has made all of his required deposits and also made additional, $5,000 deposits in 2005 and 2007. The money that George invested in the contract was invested in equity segregated funds. By early 2009, George had made $9,600 in “regular” deposits to the plan and the additional $10,000 in unscheduled deposits. The policy offers George the statutory death and maturity guarantees and a “reset” option. If George had died in early 2009, when the policy had a fair market value of $14,200, how much would his beneficiary have received from the life insurance company?

C. When an insurance company is considering an application, knowledge obtained by its agent concerning the applicant is considered to be knowledge of the principal in which of these situations?

10. Most deferred annuities impose early withdrawal charges and market value adjustments if funds are taken out of the annuity prior to maturity. Penalties include all of the following except:

10. Arthur purchased a deferred annuity with the AllCan Life Insurance Company on July 15, 2000, with a single deposit of $12,000 that was deposited into a segregated growth equity fund to increase its value during the deferred period. The segregated fund offered the minimum statutory guarantee at death of the annuitant or maturity of the plan. Due to recent market downturns the fair market value of the plan units is currently only $11,200. How much would the plan beneficiary receive if Arthur were to die today?

1. Who or what may invest directly in units of a segregated fund?
A. Individuals.
B. Life insurance contracts.
C. Annuities.
D. Corporations.

7. Which of the following annuities would provide the highest level of annual income, assuming that the same amount of premium was invested at the same time, with the same insurer?

A. Which of the following statements describe the characteristics of a fiduciary obligation of a life insurance agent to a client?

1 The agent must be able to exercise some discretion or power in his or her business dealings with the client.

2 The agent’s exercise of his or her power or discretion affects the client’s legal or practical interests.

3 The client is at the mercy of the agent in the exercise of his or her power or discretion.

4 The agent has access to the client’s confidential financial and health information.

3. What is the purpose of an “impaired” annuity?

5. What provision is often included under a joint and last survivor annuity in order to increase the annuity
payments that are paid out while both annuitants are still living?

B. When Harry sold Sally a whole life participating policy to cover her $250,000 life insurance need, he failed to point out to her that she could have protected herself by purchasing a term-to-100 policy at only about two-thirds the cost. What he also didn’t tell her was that he was selling her the whole life plan because it paid him a much larger commission. Of what offence was Harry guilty?

A. Which of the following statements best describes a typical provision of a Temporary Insurance Agreement (TIA)?

8. Tad owns a deferred annuity with a life insurance company that is invested in units of a segregated fund. Tad financed the annuity with a single deposit of $12,000 and invested the funds in a newly issued segregated fund with a unit value of $10. The annuity that Tad owns offers a 75% guarantee on segregated fund deposits at death of the annuitant or maturity of the plan. Tad has experienced a personal financial crisis and needs to withdraw $3,000 from his deferred annuity. What will the death benefit guarantee of the annuity become if Tad withdraws the $3,000 when the fund unit value is $12, if the annuity uses the proportional withdrawal method to adjust the guarantees?

9. Kathleen invests $50,000 in a segregated fund contract, which offers a 75% guarantee on death or maturity. She purchases 5,000 units at $10 per unit. Three years later, each unit is worth $8 and the value of Kathleen’s contract is $40,000. She elects to withdraw $6,000 from the contract and must surrender 750 units. What would happen to the policy guarantee if the insurer uses the linear reduction method of computing adjustments to the guarantee?

11. Assume that Arthur did not die. The next year the fund has recovered and at a time when the units owned by the deferred annuity are worth $17,500 Arthur exercises his “reset option” under the plan with regard to the guarantees. If Arthur surrenders the annuity on July 15, 2010, when the plan units have declined in value to $12,900, how much will he receive from the insurance company?

8. Why are “variable” annuities variable?

1. What is the “risk” protected against with the use of a non-registered life annuity?

6. Which of the following factors is/are considered in determining the amount of annuity payments under a term certain annuity?

A. Interest rates at time of application.

B. The gender of the annuitant.

C. The term of the annuity.

D. The life expectancy of the annuitant.

E. The frequency of the payments.

7. Segregated funds have multiple uses such as in the following case: Kofi, age 52, recently inherited $120,000 from his uncle and has come to you for investment advice. The first three things you did, of course, was to ask Kofi about his planning and investment objectives, his risk tolerance and his past investment experiences. Kofi revealed that he hopes to be able to grow the value of his windfall so that it can supplement his retirement income at age 60. He also stated that he is risk averse, having lost much of his modest savings in the stock market a couple of years ago. Lastly, Kofi hopes to be able to pass on as much as possible of the windfall to his children at his death. Being a sole proprietor, Kofi is always safety conscious when it comes to his investments and other assets. Which of the following investments would most closely match Kofi’s objectives?

11. The source of funds used to purchase the annuity impacts its taxation. If a $40,000 annuity was purchased through a registered vehicle such as an RRSP, how much tax is owed.

4. Why do segregated fund contracts offer minimum payout guarantees in the event of death and policy maturity?

4. Why does a “straight life annuity” pay the highest level of income of all types of life annuity?