LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A client exercises a reset on her segregated fund after a strong year. The agent must also explain that a reset usually:
- Aincreases the guarantee permanently and cannot be reversed by any later market decline
- restarts the maturity guarantee period, pushing the maturity date further into the future
- Clocks in the higher value with no effect at all on any other term of the contract
- Dconverts the contract into an annuity that begins paying the client income immediately
Correct answer: B) restarts the maturity guarantee period, pushing the maturity date further into the future
Resetting locks in the current market value as the new guaranteed amount, but the guarantee must then run for a fresh term from the reset date. A client close to needing the money may not want a later maturity date.
Why the other options are wrong
- AThe reset locks a higher amount, but withdrawals still reduce it proportionally afterward.
- CThe maturity date is normally pushed out, which is precisely the trade-off to disclose.
- DA reset adjusts the guarantee; annuitization is a separate election by the contract holder.
Exam tip
Every reset question hides the same trade-off: a higher guarantee for a later maturity date.
Common mistake
Resetting for a client whose money is needed before the new guarantee period ends.
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
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