LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
A client's existing segregated fund contract has a 'reset' feature. This means:
- AThe fund's unit value resets to its starting price, wiping out the gains for guarantee purposes
- BThe fees are reset to the insurer's current schedule for new contracts
- The guaranteed amount can be locked in at a higher market value, usually extending maturity
- DThe beneficiary designation is reset and must be made again by the contract holder
Correct answer: C) The guaranteed amount can be locked in at a higher market value, usually extending maturity
Resets capture growth in the guarantee. The trade-off is a new (later) maturity date. Assessing existing contracts includes checking reset availability and use.
Why the other options are wrong
- AThe reset raises the guarantee to the current market value; it does not erase gains.
- BA reset changes the guaranteed amount, not the contract's fees.
- DBeneficiaries are unaffected by a reset.
Exam tip
Reset = lock in gains into the guarantee; maturity date extends.
Common mistake
Resetting shortly before a planned withdrawal, pushing the maturity date out.
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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