Chapter 5 - Annuities
Annuitant
A person who receives an annuity contract's distribution.
Variable Annuity
Annuity that has a varying rate of return based on the mutual funds in which one has invested
Flexible Premium Deferred Annuity
Annuity that requires payments that vary from year to year.
___________________________________ may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.
Deferred
FINRA abbrev
Financial Industry Regulatory Authority
Market Value Adjusted Annuity
The owner is guaranteed a fixed interest rate for a specific period of time.
accumulation period
The time before an annuitant's retirement during which the annuitant is making payments or investments in an annuity.
the insurance company's general account
When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed?
single payment or periodic payments
Which two terms are associated directly with the way an annuity is funded?
Equity Indexed Annuity
a fixed, deferred annuity that allows the owner to participate in the growth of the stock market and provides downside protection against the loss of principal and prior interest earnings if the annuity is held to term
variable annuity
requires a securities license
mortality tables
show statistical averages or possibility of death at a certain age - helps determing premium
which of the following types of annuities will generally provide the highest monthly income
straight life
any distribution from MECs are
taxable
benefits stop at the annuitant's death
which of the following are not true regarding an annuity certain?
Pure Life Annuity
- Provides periodic benefit payments as long as the annuitant lives, with the payments ceasing at death.
Market Value Adjusted Annuity
A single-premium deferred annuity that allows a contract owner to lock in a guaranteed interest rate over a specified maturity period.
Guaranteed surrender value
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?
FINRA
An agent selling variable annuities must be registered with
Straight Life Annuity
An annuity income option that pays a guaranteed income for the annuitant's lifetime, after which time payments stop.
hedge against inflation
Fixed annuities provide all of the following EXCEPT
Straight Life Annuity
The payout option that will guarantee an annuity payment for the remainder of an individual's life. This option typically provides the largest monthly payment.
Life income with period certain
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original dies, the payments will continue to a designated beneficiary?
Surrender Charge
a fee that may be imposed on any money withdrawn from an annuity
Annuities
a fixed sum of money paid to someone each year, typically for the rest of their life.
FINRA
an agent selling variable annuities must be registered with
Equity Indexed Annuity
an annuity owner would like a return that will equal standard & Poor
pay-in period
another term for the accumulation period of an annuity
Life with Guaranteed Minimum
established and designed to guarantee the distribution of the annuity's funds, whether it is paid to the annuitant, or to a designated beneficiary upon the annuitant's death. Four of the five annuity payout options include some type of guaranteed return of the annuity's benefit payments.
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
Why is an equity indexed annuity considered to be a fixed annuity?
it has a guaranteed minimum interest rate
all of the following statements are true regarding installments for a fixed period annuity settlement option except
it is a life contingency option
Under a pure life annuity, an income is payable by the company
only for the life of the annuitant
straight life annuity
payments cease at death
Annuity Certain
pays income only for a certain period of time or for a certain amount.
fixed period annuity settlement
the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. this option pays for a specific amount of time only, and there are no life contingencies.
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
what determines the penalty for surrendering a market value adjusted annuity prematurely?
the current interest rate at time of surrender
When the income payments begin
the main difference between immediate and deferred annuities
Fixed Annuity
An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to the purchase payment or payments.
Installments for a fixed period
Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?
Installments for a Fixed Amount
has no life contingencies, a specific amount will be paid until funds are exhausted
benefit payment amounts are not guaranteed
which of the following is a feature of a variable annuity?
the insurance company
who bears all of the investment risk in a fixed annuity?
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
it is a percentage of the cash value and decreases over time
if a deferred annuity is surrendered prematurely, a surrender charge is imposed. how is the surrender charge determined?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
if an annuitant dies before annuitization, the beneficiary will receive
When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?
the insurance company's general account
which of the following is true regarding a market value adjusted annuity?
the owner is guaranteed a fixed interest rate for a specific period of time
variable annuity
under a _____________________________, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts. the annuitant's payments into the annuity are invested in the insurer's separate account.
It does not guarantee that the entire principal amount will be paid out
which of the following is NOT true regarding Life with Guaranteed Minimum annuity settlement option
which of the following is NOT true regarding a nonqualified retirement plan?
it needs IRS approval
what is not relevant for annuity issuing
marital status
fixed amount option annuity
no life contingences. a specific amount will be paid until funds are exhausted whether or not the annuitant is living.
equity indexed annuities
often tied to a familiar index, such as standard & poor's 500
all of the following statements are true regarding installments for a fixed amount EXCEPT
the payment will stop when the annuitant dies, installment for a fixed amount has no life contingencies
which of the following best describes what the annuity period is?
the period of time during which accumulated money is converted into income payments