Life - Annuities - Questions

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Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money? A) An annuity B) A survivorship life policy C) A universal life policy D) A group policy

A) An annuity Correct! An annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as a periodic payment of accumulated funds.

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

A) It is a period during which the payments into the annuity grow tax deferred. Correct! 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.

If the annuitant dies during the accumulation period, who will receive the annuity benefits? A) The beneficiary B) The annuity owner C) The insurance company D) The annuitant's estate

A) The beneficiary Correct! 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.

When an annuity is written, whose life expectancy is taken into account? A) Owner B) Annuitant C) Beneficiary D) Life expectancy is not a factor when writing an annuity.

B) Annuitant Correct! The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be.

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

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

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A) Amount paid into the plan B) Cash value of the plan C) Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount D) Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount

C) Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount Correct! If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.

Which of the following is another term for the accumulation period of an annuity? A) Liquidation period B) Annuity period C) Pay-in period D) Premium period

C) Pay-in period The accumulation period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.

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

C) 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.

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) A corporation can be an annuitant as long as it is also the owner. B) A corporation can be an annuitant as long as the beneficiary is a natural person. C) The contract can be issued without an annuitant. D) The annuitant must be a natural person.

D) The annuitant must be a natural person. Correct! 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.

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

D) 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.


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