- (Topic 2)
Xander fills out a life insurance application to purchase a $75,000 policy. The policy is accepted by the insurer and delivered to him on March 3. He pays the first month??s premium upon receipt of the policy. Unfortunately, on March 9, Xander loses his job and decides that he no longer wants the policy. What will be the consequence of this cancellation?
Correct Answer:
A
Life insurance policies in Canada generally include a ??free look?? or ??cooling-off?? period, typically lasting 10 days from the delivery date, during which the policyholder can cancel the policy for a full refund of any premiums paid. Since Xander requested the cancellation within this period, he will be entitled to a full refund. This period allows policyholders to review the terms and make a final decision without financial penalty.
- (Topic 5)
(Germaine, a shareholder-manager, already has a group RRSP for her employees. She now wants to establish a second group savings plan that allows employees to withdraw money at any time without additional taxes or penalties.
Which plan fits her needs?)
Correct Answer:
B
Agroup TFSAallows employees to withdraw fundsat any time without triggering taxes or penalties, meeting Germaine??s requirement perfectly.
Exact Extract:
"TFSAs allow contributions with after-tax dollars and withdrawals at any time without tax penalties, making them ideal for flexible saving plans."
(Reference:Segfunds-E313-2020-12-7ED, Chapter 1.3.11.2 Group Plans)
- (Topic 2)
Mercedes is a single mother to her 5-year-old son Arthur. Arthur's father Richard is not in his son's life because he is a recovering drug dealer who spent the last 4 years in and out of prison. Mercedes has full custody of Arthur and cannot count on help from her family because they live in another province.
Wanting to ensure his well-being, in the event of her death, Mercedes purchases a $100,000 life insurance policy and names Arthur the sole beneficiary of the policy. If she died without a will who would receive the death benefit?
Correct Answer:
A
Since Arthur is the named beneficiary on Mercedes' life insurance policy, the death benefit will be payable to him directly. Under LLQP provisions, life insurance proceeds designated to a minor beneficiary are generally paid into a trust or managed by a legal guardian until the minor reaches the age of majority.
In this case, because Mercedes died intestate (without a will), Arthur would still receive the
proceeds of the life insurance policy as the sole named beneficiary. However, since he is a minor, the Director of Youth Protection or a legal guardian may be appointed to manage the funds until Arthur becomes of age.
- (Topic 1)
Konrad is the owner of CrossBoy, a manufacturing company employing over 50 employees. Konrad recently took out a $500,000 loan to expand his business. Terrence works as a sales manager and is responsible for roughly 40% of the company??s revenue. Konrad recognizes the importance of Terrence's contributions to the success of the company. Therefore, in addition to a sizeable basesalary, CrossBoy also pays Terrence regular performance-based bonuses. Konrad understands that if Terrence dies prematurely, CrossBoy would suffer financially. What should he do to protect his company?
Correct Answer:
C
Key person life insurance is designed to protect a business from financial losses resulting from the death of a key employee. In this case, Terrence??s role is crucial to CrossBoy??s success due to his substantial contribution to the company??s revenue. By purchasing key person insurance on Terrence, Konrad can ensure that the company has the necessary funds to cover the financial impact of Terrence??s potential loss. Other options, like offering a group life insurance plan (A), do not directly address the specific financial risk associated with the loss of a key employee.Therefore,Option Cis the appropriate choice.
- (Topic 5)
Hussein wants to purchase a segregated fund. He has been following the news and believes the pharmaceutical sector will take off soon, and he wants to purchase a fund that will capitalize on his market view. He understands market fluctuations and is comfortable with the level of risk involved because he would only need to access these funds in 20 years.
Which of the following would be the most appropriate fund for Hussein?
Correct Answer:
B
A specialty fund would be the most suitable option for Hussein, given his specific interest in the pharmaceutical sector. Specialty funds focus on specific sectors or industries, allowing investors to capitalize on particular market views and trends. Hussein's belief in the potential growth of the pharmaceutical sector and his comfort with market fluctuations over a long investment horizon aligns well with a specialty fund. According to LLQP, specialty funds are suited for investors seeking exposure to specific industries and who are willing to accept the higher risk associated with concentrated investments.
Option A (Bond fund) does not align with Hussein??s interest in the equity market, particularly in the pharmaceutical sector. Options C and D (Balanced and Target date funds) are not focused on a specific sector and instead offer broader diversification across asset classes.
