Annuities

Annuities must be written by which of the following: A. Banks B. Stock brokerages C. Life insurance companies D. Mutual funds

Life insurance companies

In a variable annuity the investment risk is to: A. The beneficiary B. The owner C. The insurer D. The producer

The owner

A client might purchase an immediate annuity for all of the following reasons, EXCEPT: A. To annuitize the proceeds of a property/casualty insurance claim settlement B. To supplement social security retirement benefits C. To annuitize the proceeds of a life insurance policy D. To save money for a child's future college expenses

To save money for a child's future college expenses

On which type of annuity must a producer disclose that excess earnings above the guaranteed rate may vary: A. An immediate fixed annuity B. A fixed deferred annuity C. A Market Value Adjusted annuity D. An Equity Indexed annuity

An Equity Indexed annuity

The individual whose life an annuity is based upon is known as the: A. Insured B. Owner C. Beneficiary D. Annuitant

Annuitant

Which contract requires a series of benefit payments to be made at specified intervals: A. Annuity B. Endowment C. 20-Pay Life D. Modified Whole Life

Annuity

The principal use of a Life Annuity is to: A. Provide for the liquidation of debts at retirement B. Provide for the beneficiary's lifetime income C. Create capital for the annuitant's heirs D. Arrange an income for old age

Arrange an income for old age

Fixed annuities are backed by: A. The insurer's general account assets B. The Federal Deposit Insurance Corporation (FDIC) C. The insurer's separate account assets D. The Securities Investment Protection Corporation (SIPC)

The insurer's general account assets

Alice has an annuity w/ life and 10-year certain period that has her husband Marty listed as beneficiary. If Alice dies 13 years into the 10-year certain period, what will Marty receive from the insurer: A. Zero B. 10 years of benefit payments C. Marty will have to pay back three years of benefits D. Payment for the rest of his life

Zero

A client purchased a single premium deferred annuity in 2004 for $13,000. Ten years later, after their account has grown to $24,000, they withdraw $15,000. How much is taxable: A. $24,000 B. $11,000 C. $2,000 D. $13,000

$11,000

A customer paid $15,000 in premiums into their nonqualified deferred annuity over a period of time. If their account balance is now $26,000 and they withdraw $17,000, how much is taxable: A. $26,000 B$11,000 C$15,000 D$17,000

$11,000

Mr. Jones has contributed a total of $30,000 into a tax-deferred annuity over a period of time, which has now grown to $50,000 due to tax-deferred interest. If he dies now at age 50 prior to annuitizing the contract, what is the tax implication: A. $50,000 is taxable to the beneficiary as capital gain B. $20,000 is taxable to the beneficiary as ordinary income C. $30,000 is taxable to the beneficiary as ordinary income, plus a 10% penalty D. No taxes are due since annuities are life insurance products

$20,000 is taxable to the beneficiary as ordinary income

Which type of annuity requires that the customer bear part of the risk: A. An immediate fixed annuity B. A fixed deferred annuity C. An Equity Indexed annuity D. A Market Value Adjusted annuity

A Market Value Adjusted annuity

A husband & wife are co-annuitants and decide to select the joint life payout option upon annuitization. They will receive monthly annuity payments from the insurer until: A. Both the husband and wife have died B. The youngest spouse reaches age 59 1/2 C. The oldest spouse reaches age 59 1/2 D. Either the husband or wife dies

Either the husband or wife dies

An annuity where both the principal and the interest are guaranteed, but excess interest may accrue since performance is calculated using an indexing method that is usually linked to the S&P 500 is known as a: A. Market value adjusted annuity B. Equity indexed annuity C. Performance enhanced annuity D. Variable annuity

Equity indexed annuity

Which of the following Annuities will start paying the annuitant a monthly payment right away for the rest of their life: A. Deferred Annuity B. Immediate C. Flexible premium D. Fixed premium

Immediate

An annuity that will make monthly payments to the owner/annuitant while living, but has no value at their death is known as: A. Period certain B. Life income C. Fixed period D. Refund

Life Income

All of the following are true regarding annuities, EXCEPT: A. Cash surrender of an annuity in the early years may result in a surrender charge B. On a life annuity, payments begin upon the death of the annuitant C. A single premium immediate annuity is often purchased with a lump sum at retirement D. A deferred annuity is purchased with periodic payments over a period of time

On a life annuity, payments begin upon the death of the annuitant

What type of annuity will make a cash payment to the beneficiary when the owner/annuitant dies during the annuity period: A. Period certain B. Refund C. Fixed amount D. Life income

Refund

All of the following are true regarding Single Premium Immediate Life Income annuities, EXCEPT: A. They may not be surrendered for cash B. Payments begin upon the death of the annuitant C. There is no beneficiary D. They have no accumulation period

Payments begin upon the death of annuitant

If a client annuitizes an annuity to pay them $250 a month for life or for 15 years, whichever is longer, they have chosen which annuity pay-out option: A. Fixed amount B. Period certain C. Refund D. Life income

Period certain

The Joint and Survivor Life Annuity contract calls for the surviving annuitant to receive a: A. Lump sum benefit on the death of the annuitant B. Deferred income to be paid when the age of 65 is reached C. Payment each month for 10 years D. Predetermined income for life

Predetermined income for life

All of the following are true regarding an IRC Section 403(b) Tax Sheltered Annuity, EXCEPT: A. All distributions are taxable as ordinary income B. They are similar to IRC 401(k) plans C. They are funded with voluntary before-tax contributions D. They are available to anyone w/ earned income

They are available to anyone w/ earned income

Which of the following is NOT true regarding deferred annuities: A. Cash surrender in the early years will result in a surrender charge B. They have a beneficiary during the accumulation period C. They are purchased with periodic payments over a period of time D. They are often used to fund lottery pay-outs or structured settlements

They are often used to fund lottery pay-outs or structured settlements

All of the following are true regarding fixed annuities, EXCEPT: A. They have no guaranteed rate of return B. They do better when the cost of living is going down C. They do worse when the cost of living is going up D. They can be sold by any licensed Life insurance producer

They have no guaranteed rate of return

All of the following are true regarding deferred annuities, EXCEPT: A. They provide an immediate source of education funds B. They provide a source of retirement income C. They may be used to fund an IRA D. They provide tax-deferred growth

They provide an immediate source of education funds

Single premium immediate annuities are most commonly used for which of the following: A. Retirement expense B. Medical expenses C. College expenses D. Vacation expenses

Retirement expense

Cash Surrender is available on an annuity in which of the following situations: A. Once the annuitant has selected the Life Income w/ Period Certain payout option B. During the accumulation period C. Once the annuitant has selected the Refund Life payout option D. Once the annuitant has selected the Pure Life payout option

During the accumulation period

During the accumulation period, the earnings in a nonqualified deferred annuity purchased by an individual are: A. Tax free B. Tax deferred C. Taxed as capital gain D. Taxed as ordinary income

Tax deferred

When selling a variable annuity, the most important thing for a producer to verify is the applicant's __________? A. Gender B. Tax status C. Age D. Occupation

Tax status

All of the following are true regarding Market Value Adjusted annuities, EXCEPT: A. The customer is required to bear some of the investment risk B. Producers are required to have a FINRA securities license to sell them C. They are considered to be a type of variable annuity D. They are also known as Equity Indexed annuities

They are also known as Equity Indexed annuities

A woman has inherited a sum of money. She is age 60 and desires to purchase an annuity that will appreciate w/ market and economic conditions. What type of annuity should she consider? A. Variable B. Refund C. Deferred D. Fixed

Variable

Upon death, annuity proceeds payable to a beneficiary are generally taxable. However, if the beneficiary is the spouse of the deceased annuity owner/annuitant, they may continue the contract on a tax deferred basis as the ________ owner: A. Surviving B. Contingent C. Primary D. Substitute

Contingent

On a fixed annuity, the interest rate that is paid the first year, which could decline thereafter is known as the: A. Flexible interest rate B. Current interest rate C. Guaranteed minimum interest rate D. Variable interest rate

Current interest rate

Annuity payments will cease upon the death of an annuitant who has selected which of the following annuity pay-out options: A. Life income with period certain B. Life income C. Joint and survivor D. Life income with refund

Life income

When an owner/annuitant with a life income annuity dies before receiving the value of their account, the remaining funds will be: A. Retained by the insurer B. Paid to the designated beneficiary C. Paid to the annuitant's estate D. Distributed according to the terms of the annuitant's will

Retained by the insurer

When recommending the purchase or exchange of an annuity, a producer shall have reasonable grounds for believing that the transaction is __________ based upon the customer's financial status, tax status and investment objectives: A. Suitable B. Compatible C. Appropriate D. Reasonable

Suitable

A penalty that some insurers levy when an annuitant makes a withdrawal in the early years of the contract is known as a: A. Distribution fee B. Surrender charge C. Withdrawal fee D. Premature distribution penalty

Surrender charge

Which of the following is a characteristic of an annuity: A. Cash surrenders can be taken at any age w/o 10% penalty B. Their main function is the creation of an estate upon death C. They provide tax free death benefits D. They provide protection for a retired individual from outliving their savings

They provide protection for a retired individual from outliving their savings