E: Annuities

When an annuity is written, whose life expectancy is taken into account?

Annuitant Correct! The annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. The annuitant and annuity owner are often the same person but do not have to be

What is NOT fundable by annuities?

Death benefits

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to...

Guaranteed surrender value The nonforfeiture law stipulates that a deferred annuity must have a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitization

What is not true about the accumulation period of an annuity?

It would not occur in a deferred annuity The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity)

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

Joint life annuity

Accumulation Period AKA _________________

Pay-in period

which of the following is NOT true regarding equity indexed annuities?

they earn lower interest rates than fixed annuities Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.

Which two terms are associated directly with the way an annuity is funded?

Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

Annuities can be used to fund...

Retirement

Equity indexed annuities...

Seek higher returns

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is this money placed?

The insurance company's general account Fixed annuities guarantee a minimum amount of interest to be credited to the purchase payment. The insurance company can afford to make guarantees because the money of a fixed annuity is placed in the general account of the insurance company, which is part of its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners

Under a pure life annuity, an income is payable by the company...

Only for the life of the annuitant With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life

What happens if a deferred annuity is surrendered before the annuitization period?

The owner will receive the surrender value of the annuity If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.

What does Variable Annuities assume?

The risk on investment Correct! The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment