Chapter 8 - Annuities
Which of the following is an annuity that is linked to a market-related index? - Market-related annuity - Equity-indexed annuity - Deferred-risk annuity - Fixed-amount annuity
Equity-indexed annuity
An annuity is primarily used to provide - Retirement income - Disability income - Long-term care benefits - Death benefits
Retirement income
Which of these statements regarding the annuitant is CORRECT? - The contract can only be assigned by the annuitant - The annuitant is the only individual who can surrender the contract - The annuitant must also be the beneficiary - The annuitant's life expectancy determines the annuity payments
The annuitant's life expectancy determines the annuity payments
How soon can the benefit payments begin with a deferred annuity? - Anytime after date of purchase - Anytime within 12 months after date of purchase - A minimum of 6 months after date of purchase - A minimum of 12 months after date of purchase
A minimum of 12 months after date of purchase
A taxable portion of each annuity payment is calculated using which method? - Exclusion ratio - Taxable ratio - Cost basis - Tax basis
Exclusion ratio
What happens to interest earned if the annuitant dies before the payout start date? - It is taxable - It is taxable only if no beneficiary is named - It is not taxable - It is only taxable if contract has been in force under one year
It is taxable
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary? - Fixed period - Interest only - Installment refund - Life income
Life income
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? - Joint life with period certain - Life annuity with survivorship - Survivorship annuity - Temporary annuity certain
Temporary annuity certain
If the annuitant dies before the annuity state date, - The benefit will be given tax-free only to a stated beneficiary - Nothing is given to the beneficiary - The premiums paid will be given to the beneficiary - The premiums paid plus interest earned will be given to the beneficiary
The premiums paid plus interest earned will be given to the beneficiary
Fixed period settlement options are considered to be a form of a(n) - Cash value loan - Variable life policy - Annuity - Endowment
Annuity
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments? - 1 month - 6 months - 12 months - 24 months
1 month
Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in? - Payout period - Accumulation period - Deferred period - Growth period
Accumulation period
Which of these is NOT considered to be a purpose of an annuity? - Annuities are intended to create an estate - Annuities are intended to liquidate an estate - Annuities are intended for the tax-free growth of principal - Annuities are intended to distribute accumulated principal
Annuities are intended to create an estate
Under a non-qualified annuity, interest is taxed after the - Deposits have been made - Death of the annuitant - Distribution of payments - Exclusion ratio has been calculated
Exclusion ratio has been calculated
Which of these annuities require premium payments that vary from year to year? - Flexible premium immediate annuity - Flexible premium deferred annuity - Fixed premium deferred annuity - Fixed premium immediate annuity
Flexible premium deferred annuity
An annuitant is guaranteed to NOT outlive their benefits will a(n) - Survivorship clause - Guaranteed lifetime withdrawal benefit - Period certain provision - Guaranteed minimum accumulation benefit
Guaranteed lifetime withdrawal benefit
Fixed annuities provide each of the following EXCEPT - Guaranteed interest - Retirement funds - Hedge against inflation - Tax advantage
Hedge against inflation
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies? - Life only - Life with period certain - Cash refund - Installment refund
Life only
How do interest earnings accumulated in a deferred annuity? - On a tax credit basis - On a tax-deferred basis - On a tax-free basis - On a taxable basis
On a tax-deferred basis
Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments? - Period certain - Straight life - Installment refund - Amount certain
Period certain
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement? - Principal returned is taxable - Benefits are still payable tax-free to the beneficiary - Company retains entire cash value - Premiums paid plus interest earned is returned to the beneficiary
Premiums paid plus interest earned is returned to the beneficiary
What is the primary reason for buying an annuity? - Provide tax-free income - Provide a risky, yet high return investment - Provide an instant estate - Provide future economic security
Provide future economic security
Which market index is normally associated with an indexed annuity's rate of return? - NAIC - SEC - S & P 500 - A & P 300
S & P 500
What will the beneficiary receive if an annuitant dies during the accumulation period? - The greater the accumulated cash value or the total premium paid - The lesser of the accumulated cash value or the total premium paid - The interest earned on the accumulated cash value - Nothing
The greater the accumulated cash value or the total premium paid
Which type of annuity stops all payments upon the death of the annuitant? - Life annuity - Period certain annuity - Cash refund annuity - Joint and survivor annuity
Life annuity
