Chapter 5 - Annuities

Annuitant

A person who receives an annuity contract's distribution.

Variable Annuity

Annuity that has a varying rate of return based on the mutual funds in which one has invested

Flexible Premium Deferred Annuity

Annuity that requires payments that vary from year to year.

___________________________________ 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.

Deferred

FINRA abbrev

Financial Industry Regulatory Authority

Market Value Adjusted Annuity

The owner is guaranteed a fixed interest rate for a specific period of time.

accumulation period

The time before an annuitant's retirement during which the annuitant is making payments or investments in an annuity.

the insurance company's general account

When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed?

single payment or periodic payments

Which two terms are associated directly with the way an annuity is funded?

Equity Indexed Annuity

a fixed, deferred annuity that allows the owner to participate in the growth of the stock market and provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term

variable annuity

requires a securities license

mortality tables

show statistical averages or possibility of death at a certain age - helps determing premium

which of the following types of annuities will generally provide the highest monthly income

straight life

any distribution from MECs are

taxable

benefits stop at the annuitant's death

which of the following are not true regarding an annuity certain?

Pure Life Annuity

- Provides periodic benefit payments as long as the annuitant lives, with the payments ceasing at death.

Market Value Adjusted Annuity

A single-premium deferred annuity that allows a contract owner to lock in a guaranteed interest rate over a specified maturity period.

Guaranteed surrender value

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

FINRA

An agent selling variable annuities must be registered with

Straight Life Annuity

An annuity income option that pays a guaranteed income for the annuitant's lifetime, after which time payments stop.

hedge against inflation

Fixed annuities provide all of the following EXCEPT

Straight Life Annuity

The payout option that will guarantee an annuity payment for the remainder of an individual's life. This option typically provides the largest monthly payment.

Life income with period certain

Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original dies, the payments will continue to a designated beneficiary?

Surrender Charge

a fee that may be imposed on any money withdrawn from an annuity

Annuities

a fixed sum of money paid to someone each year, typically for the rest of their life.

FINRA

an agent selling variable annuities must be registered with

Equity Indexed Annuity

an annuity owner would like a return that will equal standard & Poor

pay-in period

another term for the accumulation period of an annuity

Life with Guaranteed Minimum

established and designed to guarantee the distribution of the annuity's funds, whether it is paid to the annuitant, or to a designated beneficiary upon the annuitant's death. Four of the five annuity payout options include some type of guaranteed return of the annuity's benefit payments.

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

guaranteed surrender value

Why is an equity indexed annuity considered to be a fixed annuity?

it has a guaranteed minimum interest rate

all of the following statements are true regarding installments for a fixed period annuity settlement option except

it is a life contingency option

Under a pure life annuity, an income is payable by the company

only for the life of the annuitant

straight life annuity

payments cease at death

Annuity Certain

pays income only for a certain period of time or for a certain amount.

fixed period annuity settlement

the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. this option pays for a specific amount of time only, and there are no life contingencies.

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?

the cash value will be paid to the annuitant's estate

what determines the penalty for surrendering a market value adjusted annuity prematurely?

the current interest rate at time of surrender

When the income payments begin

the main difference between immediate and deferred annuities

Fixed Annuity

An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchase payment or payments.

Installments for a fixed period

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a Fixed Amount

has no life contingencies, a specific amount will be paid until funds are exhausted

benefit payment amounts are not guaranteed

which of the following is a feature of a variable annuity?

the insurance company

who bears all of the investment risk in a fixed annuity?

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

Fixed amount

it is a percentage of the cash value and decreases over time

if a deferred annuity is surrendered prematurely, a surrender charge is imposed. how is the surrender charge determined?

Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

if an annuitant dies before annuitization, the beneficiary will receive

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

the insurance company's general account

which of the following is true regarding a market value adjusted annuity?

the owner is guaranteed a fixed interest rate for a specific period of time

variable annuity

under a _____________________________, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. the annuitant's payments into the annuity are invested in the insurer's separate account.

It does not guarantee that the entire principal amount will be paid out

which of the following is NOT true regarding Life with Guaranteed Minimum annuity settlement option

which of the following is NOT true regarding a nonqualified retirement plan?

it needs IRS approval

what is not relevant for annuity issuing

marital status

fixed amount option annuity

no life contingences. a specific amount will be paid until funds are exhausted whether or not the annuitant is living.

equity indexed annuities

often tied to a familiar index, such as standard & poor's 500

all of the following statements are true regarding installments for a fixed amount EXCEPT

the payment will stop when the annuitant dies, installment for a fixed amount has no life contingencies

which of the following best describes what the annuity period is?

the period of time during which accumulated money is converted into income payments