Annuities

What type of annuity is designed to start benefit payments many years from now and subjects the owner to investment risk? A. Deferred variable B. Immediate indexed C. Deferred fixed D. Immediate variable

A. A deferred variable annuity exposes the annuity holder to investment risk with income benefit payments starting more than one year after purchase.

All of the following are Payment Options available upon annuitization, except: A. Interest Only B. Life Income Period Certain C. Life Income with Refund D. Life Income Joint and Survivor

A. Annuity Payment Options are nearly identical to life insurance Settlement Options, except for Interest Only.

The California Insurance Code defines a senior, or elder, as someone who is what age or older? A. 65 B. 62 C. 60 D. 55

A. The California Insurance Code defines a senior, or elder, as someone age 65 or older.

The Payment Option that pays an income to two annuitants while both are living, and stops upon the death of the first annuitant, is which of the following? A. Joint Life B. Life Income Joint and Survivorship C. Life Income Joint and Survivorship with Period Certain D. Income with Refund

A. The Payment Option described is Joint Life, which pays a benefit to two annuitants while both are living, but stops upon the death of the first annuitant rather than continuing a payment to the surviving annuitant.

The annuity benefit or payment option requiring the greatest amount of capital per $1,000 of benefit is: A. Life Income Joint and Survivor 100% B. Life Income Joint and Survivor 75% C. Life Income Joint and Survivor 66 2/3% D. Life Income Joint and Survivor 50%

A. The income benefit requiring the greatest amount of capital per $1,000 of benefit is Life Income Joint and Survivor 100%. The higher the percentage of payment for the survivor (1/2, 2/3), the greater amount of capital that is needed.

An annuity policyowner has all of the following rights, except: A. Determine the mortality table to use B. Select a settlement option C. Name a beneficiary D. Elect or cancel any riders

A. The owner has all of the contractual rights in the policy, but choosing the mortality table is not one of them. The insurer does that.

Only the _________ can surrender an annuity. A. Owner B. Annuitant C. Insurer D. Beneficiary

A. The owner has all rights in the policy, including the right to surrender it.

What is an annuitant, in regard to an annuity policy? A. The party who receives any residual policy benefits B. The party whose life the policy's benefits are based on C. The person who has all of the rights in the contract D. The issuer of the policy

B. An annuitant is the individual whose life the contract is based upon.

If a senior purchases an annuity how many days is the free look period? A. 10 B. 30 C. 15 D. 20

B. Persons who are 60 years of age or older must be given a 30-day free look period for an annuity purchase.

_____________ means ensuring that an annuity addresses a prospective owner's needs and financial objectives at the time of the sale. A. Interviewing B. Suitability C. Planning D. Advising

B. Suitability means ensuring that an annuity addresses a prospective owner's needs and financial objectives at the time of the sale.

Primarily, the _________ is the person who will receive any residual policy benefits after the annuitant has died. A. Insurer B. Beneficiary C. Owner D. Spouse

B. The beneficiary of an annuity receives any residual policy benefits upon the death of the annuitant.

X does not know what cash flow will look like over the next 10 years, but wants to fund an annuity for retirement. Which of the following premium funding methods would be best for X to consider? A. Single B. Flexible C. Variable D. Periodic

B. With a flexible premium, contributions may be made as often and in whatever amount the contract owner desires. However, most insurers do set a minimum and a maximum dollar amount they will accept.

What is the primary purpose of an annuity? A. To create an estate B. To provide funds upon premature death to surviving family members C. To protect against outliving one's income D. To create an emergency fund

C. Annuities guard against living too long and outliving retirement income. Life insurance guards against premature death.

Factors which must be considered prior to the sale of an annuity to a senior include all of the following about the purchaser except his/her: A. Financial status B. Tax status C. Gender D. Investment objectives

C. Factors which must be considered prior to the sale of an annuity to a senior include, but not are not limited to, the purchaser's financial status, tax status, and investment objectives.

If an annuity lifetime benefit is selected in most cases, it is an _________ election. A. Excellent B. Revocable C. Irrevocable D. Poor

C. If an annuity lifetime benefit is selected, in most cases it is an irrevocable election.

Only a(n) __________ can guarantee to provide an income benefit payment for as long as the annuitant is alive. A. Broker-Dealer B. Credit Union C. Insurer D. Bank

C. Only an annuity issued by an insurance company can offer and provide such a guarantee. An insurance company issues an annuity based on a mortality table.

The annuity pay-in period is also referred to as the ________ period. A. Annuity B. Deferred C. Accumulation D. Settlement

C. The Pay-In Period is considered the accumulation period, during which taxes are deferred. Accumulation periods are found within deferred annuities.

Mr. Smith and Mrs. Smith received monthly benefits from their annuity, and upon Mr. Smith's death, Mrs. Smith receives a reduced amount. What annuity payment option did they choose? A. Life with Cash Refund B. Life Income C. Life Income Joint and Survivor D. Joint Life

C. The Payment Option that would continue to pay a reduced amount to Mrs. Smith is Joint and Survivor.

Which of the following annuities typically offers no guarantees? A. Market Value Adjustment B. Fixed C. Variable D. Equity-Indexed

C. The variable annuity holder assumes all investment risk.

An annuity that is purchased with contributions made as often and in whatever amounts the owner wishes, subject only to the insurer's minimums and maximums, is called: A. A periodic premium annuity B. A single premium annuity C. A flexible premium annuity D. A fixed premium annuity

C. This defines a flexible premium annuity.

Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options? A. Straight Life B. Life Income Period Certain C. Life Income Joint and Survivor D. Joint Life

C. Under Life Income Joint and Survivor, payments would continue until the death of the second person to die.

Which one of the following is not relevant information that should be obtained by a producer in order to present practical and affordable annuity products to a senior customer? A. Concern for preservation of capital B. Source of premium payment C. Occupation and occupational status (still working or retired) D. College attended

D. Relevant information that should be obtained by a producer in order to present practical and affordable products includes the customer's occupation and occupational status (still working or retired), marital status, age, number/type of dependents, sources of income, yearly income, existing insurance, insurance needs/objectives, ability to pay for the proposed contract, source of premium payment, investment savings, liquid net worth, tax status, need for tax advantages, investment experience, concern for preservation of capital, product time horizon, and awareness of surrender charges and liquidity limitations.

A retiree elected the Life Income with 10 Year Period Certain. He/she dies the day after receiving 119 monthly payments. The beneficiary will receive _______ more payment(s): A. 12 B. 10 C. 6 D. 1

D. Since the retiree died within the period certain (10 years or 120 months), the contingent payee would receive the balance of the payments. Since the retiree has received 119 monthly payments, only one guaranteed payment remains.

All of the following are ways in which an annuity can be classified based on its premium funding method, except: A. Single B. Flexible C. Periodic D. Reinvestment

D. Single, Flexible, and Periodic are the ways in which an annuity is classified based on premium payment.

Which of the following annuity funding methods requires a constant premium? A. Single B. Flexible C. Variable D. Periodic

D. With a periodic premium, premiums are paid into the contract on a regular, scheduled basis.