A client is considering investing in segregated funds for their retirement savings. They are particularly interested in the death benefit guarantee. How is this guarantee typically applied in a segregated fund contract?

Question: A client is considering investing in segregated funds for their retirement savings. They are particularly interested in the death benefit guarantee. How is this guarantee typically applied in a segregated fund contract?

Answer options: ✅ The death benefit guarantee is paid out to the beneficiary if the market value of the fund is lower than the guaranteed amount at the time of the annuitant's death.

• The death benefit guarantee ensures that the beneficiary receives the highest market value achieved by the fund at any point during the contract term.
• The death benefit guarantee implies that the entire principal invested will be returned to the estate regardless of market performance or the annuitant's death.
• The death benefit guarantee is a fixed percentage added to the market value of the fund at the time of death, irrespective of the initial investment.

Correct answer: The death benefit guarantee is paid out to the beneficiary if the market value of the fund is lower than the guaranteed amount at the time of the annuitant's death.

Explanation: The death benefit guarantee in a segregated fund ensures that upon the annuitant's death, if the market value of the fund is less than the guaranteed amount (usually the initial investment or a reset value), the beneficiary receives the higher of the two. This protects the estate from market downturns. The guarantee is typically 75% or 100% of deposits, less withdrawals, at the time of death.