Annuities (Chapter 8)

An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefits?

1 month

How soon can the benefit payments begin with a deferred annuity?

A minimum of 12 months after date of purchase

Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?

Accumulation Period

When does an immediate annuity begin making payments?

After the first premium has been paid

Fixed period settlement options are considered to be a form of a(n):

Annuity

An annuitant is guaranteed to NOT outlive their benefits with a(n):

Guaranteed Lifetime Withdrawal benefit

Which type of annuity stops all payments upon the death of the annuitant?

Life Annuity

What annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?

Period Certain

An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?

Refund Annuity

An annuity is primarily used to provide:

Retirement Income

What is TRUE about the annuitant?

The annuitant's life expectancy determines the annuity payments

Under a non-qualified annuity, interest is taxed after the:

exclusion ratio has been calculated

Fixed annuities do NOT provide:

hedge against inflation

Simon has purchased a fixed immediate annuity. his payment amount will be dependent upon principal, interest, and the contract's _________

income period

What is an annuity that is linked to a market-related index?

Equity-indexed annuity

The taxable portion of each annuity payment is calculated using which method?

Exclusion Ratio

What is NOT considered to be the purpose of an annuity?

Annuities are intended to create estate

Which of these annuities require premium payments that vary from year to year?

Flexible Premium Deferred Annuity

How are annuities given favorable tax treatment?

Gains are taxed at distribution

What happens to interest earned if the annuitant dies before the payout start date?

It is taxable

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life Income

Which annuity payout option makes no additional payments regardless of when the annuitant dies?

Life Only

How do interest earnings accumulate in a deferred annuity?

On a tax-deferred basis

Andy, the annuitant, dies before the annuity start date. What happens now?

Premiums paid plus interest earned is returned to the beneficiary

Which market index is normally associated with an indexed annuity's rate of return?

S&P 500

What will have the highest monthly payout upon annuitization?

Straight Life

Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?

Temporary Annuity Certain

What will the beneficiary receive if an annuitant dies during the accumulation period?

The greater of the accumulated cash value or the total premium paid

Who assumes the investment risk with a fixed annuity contract?

The insurer