Chapter 20 questions and
answers
Which body is responsible for monitoring the solvency of segregated funds
with respect to guarantee provisions?
A. CLHIA
B. Assuris
C. OSFI
D. IDA - answer c) A federal regulatory body, the Office of the Superintendent
of Financial Institutions (OSFI), is responsible for ensuring that federally
regulated insurance companies are adequately capitalized. The federal
Insurance Companies Act governs these solvency requirements. Segregated
fund contracts are subject to the OSFI guidelines on guarantee provisions.
These rules are set out in OSFI's guidelines respecting equity-linked
insurance and annuity contracts with guaranteed benefits.
Which type of fund provides many of the same benefits as a segregated fund
but is legally structured as a mutual fund trust?
A. Portfolio funds.
B. Protected funds.
C. Guaranteed investment funds.
D. Closed-end funds - answer b)Unlike segregated funds, protected funds are
legally structured as mutual fund trusts and are not governed by insurance
legislation. Protected funds provide many of the same features as
segregated funds such as the capital protection. An important advantage of
this structure for the mutual fund industry is that they can be sold by
registered mutual fund salespeople at bank branches and by independent
financial advisors who lack life insurance licences. This also means that
investors and sellers of protected funds generally bypass the more
complicated administrative processes that are required for insurance
purchases. The disadvantage is that non-insurance products cannot be made
creditor-proof.
, How can the designation of an irrevocable beneficiary be changed?
A. Cannot be changed unless done so by an attorney.
B. Can only be made in the segregated fund contract itself.
C. Can only be changed with the consent of the beneficiary.
D. Cannot be changed. - answer c)In the case of an irrevocable designation,
changes in the rights of a beneficiary are subject to his or her consent. The
designation of an irrevocable beneficiary can be made in several ways. It is
normally made in the segregated fund contract itself. It can also be made in
the contract holder's will, or in some other written form.
Except for locked-in plans, when can the owner of a segregated fund
withdraw from the fund?
. At the maturity date.
B. Annually at the anniversary of the maturity date.
C. At any time while the annuitant is alive.
D. At the discretion of the OSFI. - answer c)Except for locked-in plans, which
are governed by provincial pension laws, the owner of a segregated fund can
redeem some or all of the cash value of a segregated fund at any time while
the annuitant is alive. The value of the withdrawal is based on the net asset
value of the units at the close of business on the day the withdrawal is
received.
How is the basic amount of a 100% death benefit offered by a segregated
fund determined?
A. The value of the original investment.
B. The value of the original investment plus compound earnings.
C. The difference between net asset value of the fund at death and the
original investments.
D. The difference between the net asset value at the previous reset date
and the original investments. - answer c)The basic principle behind the death
benefits offered by a segregated fund is that the contract holder's
beneficiary or estate is guaranteed to receive payouts amounting to at least
answers
Which body is responsible for monitoring the solvency of segregated funds
with respect to guarantee provisions?
A. CLHIA
B. Assuris
C. OSFI
D. IDA - answer c) A federal regulatory body, the Office of the Superintendent
of Financial Institutions (OSFI), is responsible for ensuring that federally
regulated insurance companies are adequately capitalized. The federal
Insurance Companies Act governs these solvency requirements. Segregated
fund contracts are subject to the OSFI guidelines on guarantee provisions.
These rules are set out in OSFI's guidelines respecting equity-linked
insurance and annuity contracts with guaranteed benefits.
Which type of fund provides many of the same benefits as a segregated fund
but is legally structured as a mutual fund trust?
A. Portfolio funds.
B. Protected funds.
C. Guaranteed investment funds.
D. Closed-end funds - answer b)Unlike segregated funds, protected funds are
legally structured as mutual fund trusts and are not governed by insurance
legislation. Protected funds provide many of the same features as
segregated funds such as the capital protection. An important advantage of
this structure for the mutual fund industry is that they can be sold by
registered mutual fund salespeople at bank branches and by independent
financial advisors who lack life insurance licences. This also means that
investors and sellers of protected funds generally bypass the more
complicated administrative processes that are required for insurance
purchases. The disadvantage is that non-insurance products cannot be made
creditor-proof.
, How can the designation of an irrevocable beneficiary be changed?
A. Cannot be changed unless done so by an attorney.
B. Can only be made in the segregated fund contract itself.
C. Can only be changed with the consent of the beneficiary.
D. Cannot be changed. - answer c)In the case of an irrevocable designation,
changes in the rights of a beneficiary are subject to his or her consent. The
designation of an irrevocable beneficiary can be made in several ways. It is
normally made in the segregated fund contract itself. It can also be made in
the contract holder's will, or in some other written form.
Except for locked-in plans, when can the owner of a segregated fund
withdraw from the fund?
. At the maturity date.
B. Annually at the anniversary of the maturity date.
C. At any time while the annuitant is alive.
D. At the discretion of the OSFI. - answer c)Except for locked-in plans, which
are governed by provincial pension laws, the owner of a segregated fund can
redeem some or all of the cash value of a segregated fund at any time while
the annuitant is alive. The value of the withdrawal is based on the net asset
value of the units at the close of business on the day the withdrawal is
received.
How is the basic amount of a 100% death benefit offered by a segregated
fund determined?
A. The value of the original investment.
B. The value of the original investment plus compound earnings.
C. The difference between net asset value of the fund at death and the
original investments.
D. The difference between the net asset value at the previous reset date
and the original investments. - answer c)The basic principle behind the death
benefits offered by a segregated fund is that the contract holder's
beneficiary or estate is guaranteed to receive payouts amounting to at least
