Chapter 7 - Annuities
An immediate annuity consists of a: variable premium flexible premium single premium deferred premium
single premium
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation? 403(b) Plan deferred payment single premium period certain
single premium
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? deferred flexible variable fixed
variable
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase? fixed period fixed deferred fixed immediate fixed variable
fixed deferred
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities? installment immediate fixed installment deferred flexible installment deferred flexible premium deferred
flexible installment deferred
The type of annuity that can be purchased with one monetary deposit is called a(n) - single deposit annuity - single premium annuity - fixed annuity - immediate annuity
- immediate annuity
Equity Indexed Annuities are invested in which of the following: insurer's general account saving bonds insured's general accounts S&P 500
S&P 500
What is considered to be a characteristic of an immediate annuity? - benefit payments start within 1 payment period of purchase - benefit payments start within 5 yrs of initial purchase - normally tied to a specific equity or stock index - periodical contributions begin immediately
- benefit payments start within 1 payment period of purchase
G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer: - does not have to make any further payments - must continue to make monthly payments to G's beneficiary for the rest of beneficiary's life - must pay G's beneficiary the difference between the amount paid to G and the $50,000 in a lump sum - must continue to make monthly payments to G's beneficiary until the difference between the amount paid to G and the $50,000 is paid out
- does not have to make any further payments
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide? - income for a fixed period stated in the contract - income that cannot be outlived by the owner - inflation protection - tax free income
- income that cannot be outlived by the owner
Which of these is an element of a single premium annuity? - deferred payment - lump sum payment - fixed income - tax deductible
- lump sum payment
Which of the following is a characteristic of a variable annuity? - underlying equity investments - does not have surrender chargers - does not provide a transfer of ownership - selling this product required only a life license
- underlying equity investments (in a separate account)
Which type of contract liquidates an estate through recurrent payments? universal life insurance whole life insurance annuity 401(k)
annuity
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? fixed certain joint and full survivor life annuity with period certain installment period
life annuity with period certain
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n) cash refund installment refund straight life annuity life annuity w/ period certain
straight life annuity because it is based only on life expectancy but it created a risk that the annuitant may die early and forfeit much if the value of the annuity to the insurance company
