LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
A 'reset' of the guarantee:
- AChanges the annuitant to a younger life so the contract can run for a longer term
- BLowers the guaranteed amount to the current market value when the fund has fallen
- Locks in a higher market value as the new guarantee, usually restarting the maturity term
- DReduces the fees on the contract to the insurer's current schedule for new business, for the balance of the term
Correct answer: C) Locks in a higher market value as the new guarantee, usually restarting the maturity term
Resets capture gains in the guarantee. The extended maturity date is the trade-off; automatic resets on death guarantees may not extend the date.
Why the other options are wrong
- AA reset has no effect on who the annuitant is.
- BIt raises the guarantee; it is not used to lower it.
- DA reset does not change the contract's fees.
Exam tip
Reset = new higher guarantee, new maturity date.
Common mistake
Resetting without explaining the extended maturity.
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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