Which of the following statements about segregated funds and their guarantees is TRUE?

Question: Which of the following statements about segregated funds and their guarantees is TRUE?

Answer options:

• The death benefit guarantee for segregated funds can always be reset at the policyholder's discretion, regardless of market conditions. ✅ Segregated funds offer a guarantee that the policyholder will receive at least a certain percentage (e.g., 75% or 100%) of their deposits back at maturity or death.
• Maturity guarantees on segregated funds ensure that the policyholder's capital will grow by a minimum fixed percentage each year.
• Creditor protection for segregated funds is automatically available from the moment the contract is purchased, irrespective of the beneficiary designation.

Correct answer: Segregated funds offer a guarantee that the policyholder will receive at least a certain percentage (e.g., 75% or 100%) of their deposits back at maturity or death.

Explanation: Segregated funds, unique to Canada, provide contractual guarantees to the policyholder, typically guaranteeing a return of 75% or 100% of the principal invested at maturity (after 10 years) or upon death, regardless of market performance. This provides downside protection not found in conventional mutual funds. The death benefit guarantee can be reset, but typically at specific intervals or under certain conditions, not always at the policyholder's discretion.