Annuities - Section 6

Before you visit a senior citizen`s home, you must provide all the following: List of names of others who will be joining you on the sales appointment. Incorrect Answeradvise the senior he may invite family members to the presentation. Incorrect Answerstate the purpose of the meeting when the meeting begins at the home. Agent must state the purpose of the meeting when the meeting begins at the seniors home. Except:

12 point type written notice stating that a sales presentation will be given. A small technicality; the notice should be in 14 point type.

the following are considered an IRA? ESA. Simple IRA Roth IRA with a fixed annuity. Except?

529 college saving plan. 529 plans are not considered IRA, but are qualified plans.

Premiums paid into a variable annuity purchase which of the following?

Accumulation units. When money is being paid into an annuity it is in the accumulation phase and the premium is purchasing accumulation units. In the pay-out phase the accumulation units are converted to annuity units.

The person who receives payments from the annuity is an (most complete answer):

Annuitant. The annuitant gets the payments. The owner is the person who buys the contract, but doesn't have to be the one who receives the benefits. .

All the following are true regarding annuities ? You will not pay taxes until you begin to withdraw your money. You can purchase a contract that provides lifelong income. Annuities may be used for your IRA investment vehicle. Except?

Annuities themselves are considered qualified plans by the IRS. Annuities are treated on a tax deferred basis, but are not considered qualified plans unless they are in a qualified vehicle, such as a IRA or TS.

The annuitization period or liquidation period is the:

Annuity period. The annuity period is referred to as the annuitization period, or liquidation perio

Who would receive the highest payout for a $20,000 single premium immediate annuity, assuming all four contracts are identical?

Barney, age 65 Barney would receive the highest payout because he is the oldest male. Audrey would receive the lowest payout since she is female and the youngest.

A separate account would be used in each of the following? Flexible premium deferred annuity - variable Immediate annuity - variable Single premium deferred annuity - variable. Except?

Deferred annuity - fixed. Only variable accounts would have a separate account to manage the invested funds

Premium payment plans for a Variable Annuity contract would include all of the following choices? Single premium. Flexible premium. Level premium. Except?

Deferred premium. Deferred is not a method of payment, it refers to when payout will begin. Deferred means payout will begin in the future, at least more than 1 year from contract date.

The future account value of the annuity Jason purchased is connected to the S&P 500 index. What type of annuity did he purchase?

Equity-Indexed annuity. Equity Index annuities provide a guaranteed minimum interest or gains/performance of an index such as the S&P 500 index.

All of the following are benefits of an annuity ? Interest earned is tax deferred. Benefits may be paid to a beneficiary if an annuitant dies prematurely. You can lock in a monthly income stream.

Expenses and surrender charges are less than most other retirement products. The chief downside to annuities can be high expenses (sometimes almost 1% more a year than mutual funds), high surrender charges during the initial years of a contract, and the tax burden they can impose on heirs.

What type of annuity would feature a monthly payment and would not pay out immediately?

Flexible premium deferred annuity. A flexible premium deferred annuity is bought with several payments and the benefit is paid more than one year after it is purchased. It is not paid out immediately.

An annuity that is purchased with a single, lump sum and provides income within one year is an:

Immediate Annuity. An Immediate annuity is purchased with a single, lump sum and provides income payments that start within one year from the date of purchase.

What type of annuity would provide a locked in, guaranteed rate that makes monthly payments now?

Immediate fixed. You lock in an earnings rate, and receive monthly payments that include a return of your investment, plus taxable earnings.

Jason purchased an annuity, making a single lump-sum payment on Dec. 1 2009. His benefits began on Jan 1, 2010. What kind of annuity did Jason buy?

Immediate. Payout began within one year of the contract date which makes this an immediate annuity. The correct name would be a single premium immediate annuity (SPIA). Incorrect AnswerDeferred.

During the accumulation period of a deferred variable annuity, the value of the individual account arises or falls based on the

Investment results. The value is based on the investment experience of the separate accounts.

Which of the following annuity settlement or benefit options might be most appropriate for providing retirement income to a married couple?

Joint and survivor. Joint and survivor will pay until the last person dies thus guaranteeing both of them an income until death. Incorrect AnswerStraight life annuity

What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living?

Life with period certain. Life income period certain guarantees a minimum number of years of payments or lifetime whichever is longer.

All of the following are annuity premium factors: Age. Sex. Assumed interest rate. except?

Medical history. Health is not a primary premium factor in writing annuities.

If both an older and younger person had annuity funds of the same amount and both annuitize on the same date, exercising one of the life options, which individual would receive the larger payment?

Older person. The older person would receive the higher payout because principal must be paid out by life expectancy.

hat is the disadvantage in buying a fixed annuity?

Purchasing power may be eroded over time due to inflation. The disadvantage in a fixed annuity is that the purchasing power may be eroded over time due to inflation.

Which of the following IRA contributions are not tax deducible when the funds are contributed?

Roth IRA Contributions are NOT deductible when the funds are contributed, but the Roth IRA earnings accumulate tax- free and remain tax-free upon distribution.

Selling each of the following would require an additional securities license ? Variable TSA. Immediate variable annuity. Deferred variable annuity. Except?

S & P 500 indexed annuity. Equity index annuities are not securities, but usually mirror security indexes such as the S&P 500, with the goal of receiving higher returns than fixed annuities, but without the risk of a variable annuity.

What annuity benefit will pay a specific amount for the remainder of the annuitant`s life?

Straight Life. The straight life annuity will pay a specific amount for the remainder of the annuitant`s life. This payment stops when the a annuitant dies.

What happens to the annuity if an annuitant dies in the 3rd year of a 5 year period certain contract?

The payments continue to the beneficiary until the end of the 5 year period. If the annuitant dies within this time period, payments continue to the beneficiary until the end of the guaranteed time. The payments stop if the annuitant dies after the period certain.

The IRA early withdrawal penalty does apply to distributions below? Used to pay back taxes. Used to buy a first time home. The IRA owners death. Except?

Used to pay for higher education for your friend. Early withdrawals are used to pay for the qualified expenses of higher education for the IRA owner and/or eligible family members, NOT friends.

Which of the following annuity payout or benefit options does not guarantee a lifetime income to the annuitant?

An annuity certain. Annuity certain payout is for a fixed period of time.

the following are correct/true statements : An annuity can be classified as immediate or deferred, depending on when benefit payments begin. Annuities that pay benefits inspecified dollar amounts are fixed annuities; annuities that pay benefits in relation to units are variable annuities. Straight (Pure) life annuities provide income as long as the annuitant lives; benefits terminate at his/her death. Except / False/ incorrect

An installment refund annuity guarantees a specific amount of benefits, payable to the annuitant only; if death occurs prior to total payout, a portion of the premium is refunded to the annuitants estate or beneficiary.

What is the difference between an immediate and a deferred annuity?

Deferred payments are postponed, while the immediate payments start soon after 1st payment. The focus is on when payouts begin. With an immediate annuity, the insurer agrees to start making payments soon after the contract is signed. With a deferred annuity, payments by the insurer are postponed until a later time.

All of the following are true about variable annuities? Payouts are made in units, not fixed dollar amounts Variable annuities are regulated by the S.E.C. Annuity income varies with the market value of securities Except?

The method of purchase and settlement options differ from a fixed annuity. Rationale: Variable annuities can be purchase the same as fixed annuities, either by single payment or periodic payments.

When making recommendations to senior citizens, the following information must be taken into account? The client`s investment experience. Product time horizon. Sources of income. Except?

The senior`s awareness of your marital status. You need to know the client`s marital status, but the customer doesn`t need to know your marital status.

In California, a senior is investor, age 60 and above, in variable annuity contracts receive special consideration during the 30 day free look/cancellation period? During this 30 days the premium may be invested only in fixed income and money market investments. The fixed income and money market investment assures that cancellation during free look the owner will be refunded all premiums in full. A senior investor insisting his/her funds immediately invested in mutual funds, stocks or bonds, or any non-guaranteed fund a cancellation will entitle him/her to refund of the account value on the date the insurer receives the request, during the cancellation period. Except ?

These disclaimers must be printed all individual and group contracts. This is FALSE. The word "group" made this incorrect. It applies to individual contracts. Keywords - receive, except: Means which is FALSE

An annuity is a living benefit and a/an:

insurance policy that makes a series of periodic payments in exchange for a lump sum payment. An annuity is a policy under which an insurance company promises to make a series of periodic payments to a named individual in exchange for a lump sum payment or a series of payments.

The accumulation phase or period?

permits the principal to grow by tax-deferred interest. The accumulation period/phase is the period of time when money is earning interest on a tax-deferred basis. Sometimes the test will call this the "prior to annuitization period/phase. Accumulation phase/period is when money grows tax deferred and additional money may or may not be able to be contributed into the annuity. For example a single premium deferred annuity would not allow additional deposits/premium to be paid. The second phase/period of an annuity is the annuitization period/phase which is when payout begins.