LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing contract has an automatic annual reset of the death benefit. The review should record that:
- AThe reset extends the contract's maturity date by a full term each time that it operates
- BThe reset must be requested in writing by the contract holder each year
- CThe reset lowers the guarantee to the market value when the contract has fallen in value
- The reset raises the death benefit guarantee when the market value is higher, up to a stated age
Correct answer: D) The reset raises the death benefit guarantee when the market value is higher, up to a stated age
Automatic death resets capture gains for the beneficiary without extending the maturity date, and they are one of the features that make an older contract worth keeping.
Why the other options are wrong
- ADeath resets generally do not extend the maturity date.
- BAn automatic reset requires no action from the holder.
- CResets only ever raise the guarantee.
Exam tip
Automatic death resets lock in gains for the beneficiary.
Common mistake
Confusing an automatic death reset with a discretionary maturity reset.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
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