Chapter 6-Classification Annuities
What is a contract owner purchasing when they pay premiums into the separate account?
Accumulation units
The value of each accumulation unit varies:
Daily
Which of the following best describes equity indexed annuities?
Earn a guaranteed minimum rate of return or a current interest rate which is linked to the S&P 500
Of the following annuities, which provides a guaranteed minimum interest rate?
Fixed annuity
Premiums from variable annuities are invested in the insurer's:
Separate account
In addition to a life insurance producer license, producers selling variable products must have a(n):
Series 6 or 7 license
Fixed annuities are characterized by all of the following, EXCEPT:
The interest rate at which premium payments grow interest during the accumulation phase is not fixed.
All of the following statements are true regarding the interest rate guarantees of fixed annuities, EXCEPT:
If the insurer's current interest rate drops below the quoted fixed interest rate, the insurer will pay the lower current interest rate.
During the annuity phase of a variable annuity, how does the number of annuity units affect a variable annuity contract owner?
It determines the contract owner's dollar value investment in the separate account.
During the accumulation period, how does the number of accumulation units affect a variable annuity contract owner?
It is an indication of the portion of the separate account owned by the contract owner.
Fixed annuities have:
Level annuity benefits
For which of the following annuities must a surrender fee be paid if the interest rate has increased, and the annuity is surrendered before it is annuitized?
Market value adjusted annuity
If this annuity is surrendered prior to annuitization, the contract owner must pay a surrender fee if the interest rate has increased:
Market value adjusted annuity
All of the following are true of variable annuities, EXCEPT:
The investment risk is borne upon the insurance company.
An insurer's general account is:
Used to invest premiums for fixed annuities
The cash value of Pete's annuity is invested in securities. What type of annuity does Pete have?
Variable
For which of the following annuities must an agent have a securities license in order to sell?
Variable annuity
Variable annuities have
Variable interest rates and benefits
What is a disadvantage of fixed annuities?
Earning potential may not be enough to offset the effects of inflation
This fixed annuity has a minimum interest rate and a current interest rate that is tied to the S&P 500:
Equity indexed annuity
This annuity is regulated as a securities product and agents selling this product must have a securities license:
Variable annuity
Which of the following fixed annuities has a minimum rate of return and a current rate of return that is connected to the S&P 500?
Equity indexed annuity
What accounting unit is used during the annuity phase of a variable annuity?
Annuity unit
During the payout period of a variable annuity, the amount of each payment is based on:
Annuity units
Jenny surrenders her deferred variable annuity 10 years after making premium payments. Which of the following is true?
Variable annuities are back-end loaded.
Which of the following is characteristic of fixed annuities?
Fixed interest rates during the payout period
How many accumulation units are in the separate account?
A set number
Which annuity provides a guaranteed minimum rate of return?
Fixed annuity
Bertran, a 30-year old convenience store clerk, wants to buy an annuity to plan for his retirement. Bertran is concerned about the buying power of the dollar in future years, and wants to be sure the annuity he buys keeps up with inflation. What annuity would you recommend to him?
Flexible Premium Variable Annuity
What is an advantage of fixed annuities?
Knowing the exact amount of each annuity payment
