Annuities

Equity indexed annuities

Seek higher returns

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant.

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

Joint life annuity.

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

Nothing; the payments will cease.

Which of the following can surrender a deferred annuity contract?

Only the annuity owner

payment not guaranteed; premiums are in separate account, and invested in stocks and bonds

variable annuities

If a beneficiary is NOT named for annuity benefits, to which entity will the benefit be paid?

The annuitant's estate

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT

It is a life contingency option.

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Life income with period certain.

Which of the following is NOT true about a joint and survivor annuity benefit option?

Payments stop after the first death among the annuitants.

Classification of annuities:

Premium payment method When income payments begin How premiums are invested Disposing of proceeds

All of the following statements about equity index annuities are correct EXCEPT

The annuitant receives a fixed amount of return.

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate.

a contract that provides income for a specified period of years, or for life.

annuity

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?

bail-out

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?

$50,000

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

The payments will stop when the annuitant dies.

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

Benefit payment amounts are not guaranteed.

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

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

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

When income payments begin

immediate vs. deferred

interest rate tied to an index; earn higher rate than fixed annuities, not as risky as variable annuities or mutual funds

indexed annuities

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or the cash value.

All of the following statements about equity index annuities are correct

They invest on a more aggressive basis aiming for higher returns. They have a guaranteed minimum interest rate. The interest rate is tied to an index such as the Standard & Poor's 500.

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?

2.5%

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.

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate.

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT

death benefit

Which of the following are NOT fundable by annuities?

death benefits

There are two types of refund life annuities:

cash refund & installment refund

The main difference between immediate and deferred annuities is

When the income payments begin.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend

straight life

the annuity payments are guaranteed for the lifetime of the annuitant, and for a specified period of time for the beneficiary

life with period certain

How premiums are invested

fixed vs. variable

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?

annuity certain

contracts provide that the surviving recipients will receive a reduced payment after the first recipient dies

joint and survivor

a payout arrangement where two or more annuitants receive payments until the first death among the annuitants, and then payments stop

joint life

provides the highest monthly benefit, but there is no guarantee that the entire principal will be paid out.

pure life

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

It has a guaranteed minimum interest rate.

Disposing of proceeds

pure life, annuity certain, or life refund annuity

funds are paid INTO the annuity during this period

accumulation

In an annuity, the accumulated money is converted into a stream of income during which time period?

Annuitization period

Premium payment method:

single premium vs. periodic

Which of the following types of annuities will generally provide the highest monthly income?

straight life

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

It is a percentage of the cash value and decreases over time.

funds are paid INTO the annuity during this period

annuitization

The minimum interest rate on an equity indexed annuity is often based on

An index like Standard & Poor's 500.

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

The term "fixed" in a fixed annuity refers to

Guaranteed rate of interest Equal annuity payments Amount and length of payments