ExamFX Ch6

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

Single payment or periodic payments

All other factors being equal, which of the following individuals would receive the largest monthly check from a single premium straight life immediate annuity?

A 60-year-old man

Which of the following products will protect an individual from outliving his or her money?

Annuity

Which of the following products provides income for a specified period of years or for life, and protects a person against outliving his or her money?

An annuity

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest

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

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT

It is a life contingency option.

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant.

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity.

Equity Indexed Annuities

Seek higher returns

Annuities can be used to fund which of the following?

Retirement plans

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

Only for the life of the annuitant.

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it?

Deferred

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

Joint and Survivor

Which of the following best describes a pure life annuity settlement option?

Pure life provides payments for as long as the annuitant is alive.

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called

Life income with period certain.

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?

Pure life

Which of the following is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner.

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?

Immediate

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person.

All of the following statements are true regarding installments for a fixed amount EXCEPT

The payments will stop when the annuitant dies.

Which of the following is another term for the accumulation period of an annuity?

Pay-in period

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

Who bears all of the investment risk in a fixed annuity?

The insurance company

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or the cash value.

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

The beneficiary

Which of the following best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

Which of the following is NOT fundable by annuities?

Death benefits