LLQP Segregated Funds & Annuities · Component 2.2 · 30% of the exam
Under a GMWB contract, the 'guaranteed withdrawal base' or 'bonus base':
- AThe death benefit payable to the beneficiary if the annuitant dies before withdrawals begin, calculated on the deposits made
- BCan be withdrawn as a lump sum at any time, since it represents the client's guaranteed entitlement
- CIs the market value of the contract on the most recent valuation date
- A notional amount used to calculate the withdrawal, raised by bonuses and resets, and not cashable
Correct answer: D) A notional amount used to calculate the withdrawal, raised by bonuses and resets, and not cashable
The base is a calculation figure. Clients often confuse it with a cash value; it cannot be surrendered for that amount.
Why the other options are wrong
- AThe death benefit is market value or a separate guarantee.
- BThe base is notional and cannot be cashed.
- CMarket value is a separate figure.
Exam tip
GMWB base = notional; drives the withdrawal amount; not cashable.
Common mistake
Presenting the bonus base as the client's account value.
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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