Ch 8. Annuities (Life Insurance)
How soon can the benefit payments begin with a deferred annuity?
A minimum of 12 months after date of purchase
Which of these will have the highest monthly payout upon annuitization?
Straight life
Which of these statements regarding the annuitant is CORRECT?
The annuitant's life expectancy determines the annuity payments
Fixed period settlement options are considered to be a form of a(n)
annuity
If the annuitant dies before the annuity start date,
the premiums paid plus interest earned will be given to the beneficiary
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
1 month
Which market index is normally associated with an indexed annuity's rate of return?
S & P 500
Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?
Accumulation period
When does an immediate annuity begin making payments?
After the first premium has been paid
What is the nonforfeiture value of an annuity before annuitization?
All premiums paid, plus interest, minus any withdrawals and surrender charges
Which of these is NOT considered to be a purpose of an annuity?
Annuities are intended to create an estate
Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
Annuitization phase
Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?
During periods of inflation, annuitants will experience a decrease in purchasing power of their payments
The taxable portion of each annuity payment is calculated using which method?
Exclusion Ratio
Which of these annuities require premium payments that vary from year to year?
Flexible premium deferred annuity
What happens to interest earned if the annuitant dies before the payout start date?
It is taxable
Which type of annuity stops all payments upon the death of the
Life annuity
Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
Life annuity certain
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life income
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
Life only
How do interest earnings accumulate in a deferred annuity?
On a tax-deferred basis
During the accumulation period, who can surrender an annuity?
Policyowner
An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
Refund annuity
Who assumes the investment risk with a fixed annuity contract?
The insurer
Under a non-qualified annuity, interest is taxed after the
exclusion ratio has been calculated
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the
income period
An annuity is primarily used to provide
retirement income
