Annuities

In an annuity, the accumulated money is converted into a stream of income during which time period? A. Conversion period B. Annuitiization period C. Payment period D. Amortization period

B. Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream.

All of the following are true of an annuity owner EXCEPT A. The owner is the party who may surrender the annuity B. The owner must be the party to receive benefits C. The owner pays the premiums on the annuity D. The owner has the right to name the beneficiary

B. The owner must be the party to receive benefits The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.

An individual has been making periodic premium payments on an annuitt. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? A. Deferred B. Fixed C. Flexible premium D. Immediate

A. Deferred. Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.

If the annuitant dies during the accumulation period, who will receive the annuity benefits? A. the insurance company B. the annuitants estate C. the beneficiary D. the annuity owner

C. the beneficiary If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a A. Joint and survivor annuity B. Deferred annuity C. Pure annuity D. Joint life annuity

D Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.

Which of the following is true regarding the accumulation period of an annuity? A. It is a period of time duirng which the beneficiary receives income B. It is limited to 10 years C. It is a period during which the payments into the annuity grow tax deferred D. It is also referred to as the annuity period

C The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? A. It does not guarantee that the entire principal amount will be paid out B. It is a life contingency option C. The beneficiary receives the remainder of the principal amount upon the annuitants death D. Payments can be made in installments and as a single cash refund

A. It does not guarantee that the entire principal amount will be paid out With the Life with Guaranteed Minimum annuity settlement option, if the annuitant dies before the principal amount (the amount paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his/her beneficiary. Pure life provides the highest monthly benefits for an individual annuitant.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend A. Installment refund B. Joint and survivor C. Straight life D. Life income with period certain

C. Straight life With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant.

All of the following statements are true regarding installments for a fixed amount EXCEPT A. Value of the account and future earnings will determine the time period for the benefits B. This option pays a specific amount until the funds are exhausted C. The annuitant may select how big the payments will be D. The payments ill stop when the annuitant dies

D. The payments ill stop when the annuitant dies Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive A. Nothing; the payments will cease B. Guaranteed minimum benefit C. The amount paid into the annuity D. The remainder of the principal

A. Nothing the payments will cease Straight or pure life annuity will pay a specific amount of income for the remainder of the annuitant's life. This payment will cease at death, regardless of the amount of principal that hasn't been paid out. There is no refund or payments to survivors.

Which of the following best describes what the annuity period is? A. The period of time during which accumulated money is converted into income payments B. The period of time from the accumulation period to the annuitization period C. The period of time during which money is accumulated in an annuity D. The period of time from the effective date of the contract to the date of its termination

A. The period of time during which accumulated money is converted into income payments The annuity period is the time during which accumulated money is converted into an income stream.

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? a) Joint and survivor b) Pure life c) Life with guaranteed minimum d) Installment refund

B. Pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? A. The annuitant must be a natural person B. A corporation can be an annuitant as long as it is also the owner C. A corporation can be an annuitant as long as the beneficiary is a natural person D. The contract can be issued without an annuitant

A Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.

Which of the follwing best describes a pure life annuity settlement option? A. Pure life provides payments for as long as both the annuitant and the spouse are living B. Pure life provides payments for as long as the annuitant is alive C. Pure life guarantees that all the proceeds will be paid out D. Benefits are paid for a fixed period of time, specified when the policy begins to pay

B. Pure life provides payments for as long as the annuitant is alive Pure or straight life annuity settlement option will only pay for as long as the annuitant lives; however, if he/she dies after receiving the first payment, no more payments would be made to any other person. For this reason, pure life has the potential to pay larger monthly benefits than other options.

Which of the following is NOT true regarding the annuitant? A. The annuitant receives the annuity benefits B. The annuitant must be a natural person C. The annuitant cannot be the same person as the annuity owner D. The annuitant's life expectancy is taken into consideration for the annuity

C. The annuitant cannot be the same person as the annuity owner While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.