Annuities

Bail-out provision

Allows the owner to surrender the annuity without a charge.

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

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

Equity indexes annuities

Seek higher returns. They are not securities, but they invest on a relatively aggressive basis to aim for higher returns.

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

Insurers guaranteed minimum rate of interest

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

It has a guaranteed minimum interest rate

Annuities can be used to fund which of the following?

Retirement plans

Which of the following is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner.

Comparison between annuities and life insurance.

Both annuities and life insurance use mortality tables. Annuities don't pay a face amount upon a death. Payments will stop upon a death

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

When a fixed annuity owner pays a monthly annuity to the insurance company, where is the money placed?

The insurance company's general account.

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

The payments will stop when the annuitant dies

Annuitization Period

The time during which accumulated money is converted into a income system. It is also know as the annuity, liquidation or pay-out period.

Annuity Period

The time during which accumulated money is converted into and income stream.

Joint and Survivor Annuity

Under a joint settlement option, payments would stop after the first death, but under the joint and survivor, payment would continue until both recipients die.

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 downsizing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders.

2.5%

Installments for a fixed period

The annuitant selects the time period for the benefits, and the insurer determines how much each payment will be. This option pays for a specific period of time only, and there are no life contingencies.

The annuity owner dies during the accumulation period without naming a beneficiary. Annuities cash value exceeds the premiums paid. Which of the following is true?

The cash value will be paid to the annuitants estate.

Which of the following will not be an appropriate use of a deferred annuity

Creating an estate

Your client owns a market value adjusted annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that the annuity owner will have to pay?

Current interest rate at the time of surrender.

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

It's a life contingency option

Fixed Annuities

Comprises most of a life insurance company's general account. Also guarantees a minimum amount of interest to be credited to the purchase payment.

Which of the following are not findable by annuities?

Death benefits

Group Annuities

Can be obtained through and employer. Group annuities can be qualified, where an employer provides retirement benefits through a tax-deferred annuity.

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

Joint and survivor

What would happen if somebody surrendered their annuity before than annuitization period?

Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.

Waiver of surrender charges

Annuity contracts provide for a waiver of surrender charges if the annuitant is confined to a Long-term Care facility for at least 30 days.