Chapter 7: Annuities
How does an indexed annuity differ from a fixed annuity
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
Which type of contract liquidators in a state the recurring payments
Annuity
A(n) Annuity pays benefits Based on units rather than stated dollar amounts A Deferred B Variable C Immediate D Unit
B variable
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy? A Straight life deferred annuity B Straight life annuity C An immediate annuity D A deferred annuity
C. An immediate annuity
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Immediate annuity
Which of the following are equity indexed annuities typically invested in
S&P 500
An immediate annuity consists of a
Single Premium
K has inherited a large sum of money. K purchases an annuity with this sum on July 1, and starts receiving payments August 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?
Single premium immediate joint with survivor annuity
A contract owner terminates an annuity before the income payment period begins. The owner will then receive
the current contract surrender value
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?
variable
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?
Life Annuity with Period Certain
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life annuity
What is the basic function of an annuity
The systematic liquidation of accumulated funds
Which of the following is not included in an annuity contract
AD&D rider
All of the following statements regarding a tax sheltered annuity (TSA) are true except A Income derived from the TSA is received income tax free B TSA's are available to public school employees C Contributions to the TSA are Tax deductible D interest earned by TSA is tax deferred
A income derived from the TSA is receiver income tax-free
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own? A immediate fixed B quarterly fixed C flexible installment deferred D adjustable deferred
C flexible installment deferred
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?
Income that cannot be outlived by the owner
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
a 45 year old woman won $100,000 In a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning at age 60. Which of these annuities do this woman purchase. A Immediate variable annuity B Immediate annuity C Deferred fixed annuity D Variable annuity
Deferred fixed annuity
The type of annuity they can be purchased with one monetary deposit is called
Immediate annuity
Variable annuities may invest Premiums in each of the following except
Insurer's corporate business account
Which of these statements concerning an individual straight life annuity is correct
Payments are made to an annuitant for life
A variable annuity has which of the following characteristics
Underlying equity investments
T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company A does not have to make any further payments B Must make for payments to the beneficiary C Must make half payments to the beneficiary D Has the option to continue making payments based on what has already been paid out
A does not have to make any further payments
What is considered to be characteristic of an immediate annuity?
Benefit payments start within one payment period of purchase
Which of these is an element of a single premium annuity
Lump-sum payment
An individual who purchases a life annuity is given protection against
the risk of living longer than expected
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)
installment refund annuity- promises that if the annuitant dies before receiving payments equal to the correct value the payments will be continued to a beneficiary until an amount equal to the contract value has been paid.
