Chapter 5: Annuities

The equity in an equity index annuity is linked to...

Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

Which of the following is NOT true about a group annuity?

- it can be owned by individual employees--< not true > Group annuity contracts can be obtained through an employer. Group annuities can be qualified, where an employer provides retirement benefits for employees through a tax-deferred annuity.

Your client plans to retire at age 50. He would like to purchase an annuity that would provide income from the time he retires to the age when social security and other pension funds become available. What settlement option should he consider?

Annuity Certain option allows the annuitant to select the time period or the amount for the benefits. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.

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? A$50,000

The life policy would pay the face amount, but because of the settlement option selected on the annuity, payments would cease upon the annuitant's death. Straight life annuity payments stop at death of the annuitant regardless of the principal left in the account.

A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?

With an immediate annuity, distribution starts within 1 year of purchase