Segregated Funds and Annuities- (SFA) Review
Questions and correct Answers, Latest 2025 Graded A
What is Segregated Funds?
LLQP - SFA VL 01
Segregated Fund is also an investment. it is just a fancy version of mutual fund.
Segregated Fund is an insurance product, and it is an investment. Segregated Funds offer
some unique features that mutual funds generally do not, such as:
- Guarantees
- Ability to BY-Pass Probate
- Creditor Proofing
A segregated Fund is a great product but remember it's not Life Insurance! rather, it's an
investment somewhat similar to a Mutual Fund.
Guarantee in Segregated Funds
LLQP - SFA VL 01
With the segregated funds, the funds must guarantee
- A minimum of 75% if the investor's principle at death, or
- Upon a 10-year maturity mark
- Some Segregated Funds even guarantee as much as 100% at death or at the 10-year mark.
As an investor, all the insurer is doing is guaranteeing what he put in.. what about growth?
This guarantee is only for peace of mind. The investor does hope that they have positive
returns, but worst case scenario. they have some level of guarantee upon death or upon 10-
year maturity mark.
1 | LLQP
,Sally and Jacob are married and have a new born daughter. Jacob will be the only income
earner in the family and currently earns $50,000 per year. What would happen to their young
family if Jacob dies permanently?
They have $200 available in their monthly budget and wanted to protect against this risk.
They considered:
- Life insurance
- Segregated Fun Investment
One month later Jacob, died.
What would have happened if they bought
1. life insurance policy
2. Segregated Fund Investment
LLQP - SFA VL 01
1. Purchase Life Insurance:
Based on his age, let's assume $200 per month would have purchased a $1,000,000 life
insurance [policy.
- Upon Jacob's death, Sally would receive death benefit of $1,000,000.
- this would be enough If invested properly, it would likely replace Jacob's income so Sally
and father would be taken care of.
2. Invest in a Segregated Fund:
It has only been one month, so they would have been invested total investment of $200.
- The fund would guarantee a minimum of 75% of their total investment or current market
value.
-The bottom line is, Sally would receive approx $200 which is clearly not enough
2 | LLQP
,Assume that Amanda has $5000 in her bank account that she would like to invest in a stock
market for several years to achieve growth.
What issues could Amanda face when she only $5,000 to invest in the stock market?
LLQP - SFA VL 02
1. Not enough knowledge/expertise to do the appropriate research
2. Even if she has expertise, she may not have enough time to pick stocks or it may not be
justified for small investment
3. Not enough money to achieve a fully diversified portfolio. Most experts would state you
need upwards of 20 different stocks in 20 different companies in order to diversify a portfolio
and $5,000 is not enough.
What is mutual fund?
LLQP - SFA VL 02
1. A mutual fund can be thought as a pot of money where many investors contribute
2. Each investor obtains units of the fund based on how much he or she contributes.
3. The fund manager invests the portfolio according to a specific mandate. For example, if it is
a equity fund, he would in invest in equity.If it is a bond fund, he would invest in a bond.
4. The investors can sit back and let the fund manager do their job.
5. Profit or loss is determine by the amount contributed (how many units) and the
performance of the fund.
What are four advantages and two disadvantages associated with mutual fund?
LLQP - SFA VL 02
Advantages:
3 | LLQP
, 1. Professional money management . A fund will hire a money manager to manage the
portfolio in accordance to the funds objective. For example, if it is a bond fund, they
will hire a bond manager.
2. Easy of investing. In any given business days, you can contact the issuer and make
an investment
3. Diversification. For example, if you are building your own stock portfolio, you would
need to invest in many different companies. But if you are investing in a fund, you are
instantly diversified by the fact the fund itself is diversified.
4. Liquidity (redemption/switched). It is relatively easy to redeem units or switch from
one fund to another.
Disadvantages:
1. fees. When you invest in a fund, you could pay load fee which is a form of a
commission or you also pay management fee.
2. Wide range of options are confusing for investors.
What are three types of fees charged by Mutual Funds
LLQP - SFA VL 03
1. Load Fees (also referred to as commissions)
2. Trailer fees
3. Management Fees
Load Fees
LLQP - SFA VL 03
A "Load Fee" is a commission charged upon purchase or redemption, but never on
both.
Three types of load fees:
1. No load Funds:
4 | LLQP
Questions and correct Answers, Latest 2025 Graded A
What is Segregated Funds?
LLQP - SFA VL 01
Segregated Fund is also an investment. it is just a fancy version of mutual fund.
Segregated Fund is an insurance product, and it is an investment. Segregated Funds offer
some unique features that mutual funds generally do not, such as:
- Guarantees
- Ability to BY-Pass Probate
- Creditor Proofing
A segregated Fund is a great product but remember it's not Life Insurance! rather, it's an
investment somewhat similar to a Mutual Fund.
Guarantee in Segregated Funds
LLQP - SFA VL 01
With the segregated funds, the funds must guarantee
- A minimum of 75% if the investor's principle at death, or
- Upon a 10-year maturity mark
- Some Segregated Funds even guarantee as much as 100% at death or at the 10-year mark.
As an investor, all the insurer is doing is guaranteeing what he put in.. what about growth?
This guarantee is only for peace of mind. The investor does hope that they have positive
returns, but worst case scenario. they have some level of guarantee upon death or upon 10-
year maturity mark.
1 | LLQP
,Sally and Jacob are married and have a new born daughter. Jacob will be the only income
earner in the family and currently earns $50,000 per year. What would happen to their young
family if Jacob dies permanently?
They have $200 available in their monthly budget and wanted to protect against this risk.
They considered:
- Life insurance
- Segregated Fun Investment
One month later Jacob, died.
What would have happened if they bought
1. life insurance policy
2. Segregated Fund Investment
LLQP - SFA VL 01
1. Purchase Life Insurance:
Based on his age, let's assume $200 per month would have purchased a $1,000,000 life
insurance [policy.
- Upon Jacob's death, Sally would receive death benefit of $1,000,000.
- this would be enough If invested properly, it would likely replace Jacob's income so Sally
and father would be taken care of.
2. Invest in a Segregated Fund:
It has only been one month, so they would have been invested total investment of $200.
- The fund would guarantee a minimum of 75% of their total investment or current market
value.
-The bottom line is, Sally would receive approx $200 which is clearly not enough
2 | LLQP
,Assume that Amanda has $5000 in her bank account that she would like to invest in a stock
market for several years to achieve growth.
What issues could Amanda face when she only $5,000 to invest in the stock market?
LLQP - SFA VL 02
1. Not enough knowledge/expertise to do the appropriate research
2. Even if she has expertise, she may not have enough time to pick stocks or it may not be
justified for small investment
3. Not enough money to achieve a fully diversified portfolio. Most experts would state you
need upwards of 20 different stocks in 20 different companies in order to diversify a portfolio
and $5,000 is not enough.
What is mutual fund?
LLQP - SFA VL 02
1. A mutual fund can be thought as a pot of money where many investors contribute
2. Each investor obtains units of the fund based on how much he or she contributes.
3. The fund manager invests the portfolio according to a specific mandate. For example, if it is
a equity fund, he would in invest in equity.If it is a bond fund, he would invest in a bond.
4. The investors can sit back and let the fund manager do their job.
5. Profit or loss is determine by the amount contributed (how many units) and the
performance of the fund.
What are four advantages and two disadvantages associated with mutual fund?
LLQP - SFA VL 02
Advantages:
3 | LLQP
, 1. Professional money management . A fund will hire a money manager to manage the
portfolio in accordance to the funds objective. For example, if it is a bond fund, they
will hire a bond manager.
2. Easy of investing. In any given business days, you can contact the issuer and make
an investment
3. Diversification. For example, if you are building your own stock portfolio, you would
need to invest in many different companies. But if you are investing in a fund, you are
instantly diversified by the fact the fund itself is diversified.
4. Liquidity (redemption/switched). It is relatively easy to redeem units or switch from
one fund to another.
Disadvantages:
1. fees. When you invest in a fund, you could pay load fee which is a form of a
commission or you also pay management fee.
2. Wide range of options are confusing for investors.
What are three types of fees charged by Mutual Funds
LLQP - SFA VL 03
1. Load Fees (also referred to as commissions)
2. Trailer fees
3. Management Fees
Load Fees
LLQP - SFA VL 03
A "Load Fee" is a commission charged upon purchase or redemption, but never on
both.
Three types of load fees:
1. No load Funds:
4 | LLQP
