CHAPTER 8 LIFE INSURANCE

On a tax-deferred basis

How do interest earnings accumulate in a deferred annuity?

annuity

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

Policyowner (The policyowner is the only one who can surrender an annuity during the accumulation period.)

During the accumulation period, who can surrender an annuity?

The annuitant's life expectancy determines the annuity payments (. Annuity payments are based on the annuitant's life expectancy.)

Which of these statements regarding the annuitant is CORRECT?

A minimum of 12 months after date of purchase (A deferred annuity is an annuity contract in which periodic income payments are not scheduled to begin for at least 12 months.)

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

the premiums paid plus interest earned will be given to the beneficiary ( If the annuitant dies before the annuity start date, the beneficiary receives the premiums paid plus interest earned.)

If the annuitant dies before the annuity start date,

Life income (The settlement option that pays a specified amount to an annuitant, but pays no residual value to a beneficiary is known as life income.)

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

After the first premium has been paid

When does an immediate annuity begin making payments?

All premiums paid, plus interest, minus any withdrawals and surrender charges

What is the nonforfeiture value of an annuity before annuitization?

S & P 500 (An indexed annuity rate of return is linked to a market index, like the S & P 500.)

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

1 month

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

Life only (The life only annuity payout option has no additional payouts regardless of when the annuitant dies.)

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

Annuitization phase

Which of the following is considered to be the period when the accumulated value in an annuity is paid out?

Flexible premium deferred annuity

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

Straight life

Which of these will have the highest monthly payout upon annuitization?

retirement income

An annuity is primarily used to provide

Life annuity certain

Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?

During periods of inflation, annuitants will experience a decrease in purchasing power of their payments ( The disadvantage of fixed annuities is annuitants could experience a decrease in the purchasing power of their payments over a period of years due to inflation.)

Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?

Exclusion Ratio

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

Refund annuity (An annuity that returns the difference between the annuity value and the income payments made to a beneficiary when the annuitant dies during the distribution period is a refund annuity.)

An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity ( a fixed sum of money paid to someone each year, typically for the rest of their life.) value and the income payments already made?

Equity-indexed annuity

Which of the following is an annuity that is linked to a market-related index?