What is a Reset Guarantee?

Many segregated contracts offer a Reset Guarantee feature. The Reset feature gives the investor an opportunity to reset the guarantee base amount from the original investment amount to the investment’s current market value. For example, if an investor had originally invested $10,000.00 and the segregated fund grew to $15,000.00 by the guaranteed reset date, then the investor could reset the guarantee base amount from $10,000.00 to $15,000.00, in an effort to guarantee more of their invested capital and possible safeguard a portion of their profits. Although most resets are done automatically by the insurance company, some insurers allow the investor to choose when they want to reset.

Automatic or manual resets can only change the Death Benefit Guarantee, not the Maturity Guarantee. Once the reset is complete, the guaranteed amount will never be decreased unless there are withdrawals from the contract.

Note: When the reset feature is used, the maturity date is also reset. Typically, the maturity date resets for another 10-year period.

The reset feature simply locks in the guarantee amount at a new value and has no other financial or income tax implications.

Each segregated contract issuer has different reset rules, so investors should understand the rules in their contracts.

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