LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client asks what the insurer actually promises under the maturity guarantee of her segregated fund. It promises that:
- AThe management fees charged over the term will be refunded if the fund fails to grow
- BThe fund will earn a fixed annual return, which the insurer tops up if the market falls short
- At maturity the client receives at least a stated percentage of deposits, adjusted for withdrawals
- DThe fund's value will never fall below the amount deposited on any day during the term, whatever the markets do
Correct answer: C) At maturity the client receives at least a stated percentage of deposits, adjusted for withdrawals
The guarantee applies on the maturity date only. Withdrawals before maturity reduce the guaranteed amount proportionally (or dollar-for-dollar under some contracts).
Why the other options are wrong
- AFees are not refunded.
- BNo return is guaranteed.
- DValues fluctuate before maturity; the floor applies only on the date.
Exam tip
Maturity guarantee: % of net deposits, on the maturity date only, insurer tops up.
Common mistake
Telling a client the guarantee protects any withdrawal.
What this tests
CISRO competency component 2.2 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 2
- A segregated fund's 'guaranteed amount' after a partial withdrawal under proportional reduction is:
- A distinctive estate advantage of a segregated fund over a non-registered mutual fund held jointly with a child is:
- Segregated fund guarantees are most valuable relative to their cost when:
- A segregated fund's annual statement reports:
- Compared with a segregated fund, an exchange-traded fund (ETF) generally offers:
- A segregated fund's 'automatic death benefit reset' feature:
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.