Life Insurance- Chapter 5

What are TWO distinct periods of annuity?

Accumulation period Annuitization period

What are the TWO types of annuities based on when the annuity payments begin?

Immediate annuities Deferred annuities

Who is an annuitant?

The person on whose life expectancy the annuity is written and who receives benefits from the 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 a. Joint life annuity b. Joint and survivor annuity c. Deferred annuity d. Pure annuity

a. Joint life annuity

If a beneficiary is NOT named for annuity benefits, to which entity will the benefit be paid? a. The annuitant's estate b. The next of kin c. The state government d. The insurance company

a. The annuitant's estate

Annuities can be used to fund which of the following? a. Variable life insurance b. Group life insurance c. Estate creation d. Retirement plans

d. Retirement plans

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? a. Full premium refund without any charges b. Guaranteed surrender value c. No payments d. Annuity dividends

b. Guaranteed surrender value

What happens if a deferred annuity is surrendered before the annuitization period? a. The owner will receive the surrender value of the annuity b. The owner will only receive a refund of premium c. The insurer can only apply the surrender value toward another annuity d. Deferred annuities cannot be surrendered prior to the annuitization period

a. The owner will receive the surrender value of the annuity

The main difference between immediate and deferred annuities is a. When the income payments begin b. How the annuity is purchased c. The number of insureds d. The amount of each payment

a. When the income payments begin

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? a. A corporation can be an annuitant as long as the beneficiary is a natural person b. The contract can be issued without an annuitant c. The annuitant must be a natural person d. A corporation can be an annuitant as long as it is also the owner

c. The annuitant must be a natural person

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders? a. 2% b. 2.5% c. 3% d. Whatever interest rate the company deems appropriate

b. 2.5%

An individual has been making periodic 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? a. Immediate b. Deferred c. Fixed d. Flexible premium

b. Deferred

A married couple's retirement annuity pays then $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? a. Straight life b. Joint and survivor c. Joint annuity d. Cash refund annuity

b. Joint and survivor

Which of the following is NOT true regarding the annuitant? a. The annuitant's life expectancy is taken into consideration for the annuity b. The annuitant receives the annuity benefits c. The annuitant must be a natural person d. The annuitant cannot be the same person as the annuity owner

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

Which of the following is NOT true regarding Equity Indexed Annuities? a. They have a guaranteed minimum interest rates b. They are less risky than variable annuities c. They earn lower interest rates than fixed annuities d. The insurance company keeps a percentage of the returns

c. They earn lower interest rates than fixed annuities

Which of the following is NOT true regarding the accumulation period of an annuity? a. It is the period during which the annuity payments earn interest b. It is the period over which the owner makes payments into an annuity c. It is also known as the pay-in period d. It would not occur in a deferred annuity

d. It would not occur in a deferred annuity

Which of the following is TRUE regarding variable annuities? a. The funds are invested in the company's general account b. The company guarantees a minimum interest rate c. A person selling variable annuities is required to have only a life agent's license d. The annuitant assumes the risks on investment

d. The annuitant assumes the risks on investment

If an annuitant dies before annuitization occurs, what will the beneficiary receive? a. Cash value of the plan b. Either the amount paid into the plan or the cash value of the plan, whichever is the GREATER amount c. Either the amount paid into the plan or the cash value of the plan, whichever is the LESSER amount d. Amount paid into the plan

b. Either the amount paid into the plan or the cash value of the plan, whichever is the GREATER amount

Which of the following best describes a bail-out provision? a. It decreases the annuity surrender value b. It allows the owner to surrender the annuity without a charge c. It waives the surrender charge for the annuitant confined to a long-term care facility d. It allows the owner to receive a higher interest rate at certain timeframe

b. It allows the owner to surrender the annuity without a charge

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a. The insurer determines the amount for each payment b. It is a life contingency option c. It will pay the benefit only for a designated period of time d. The payments are not guaranteed

b. It is a life contingency option

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? a. Annuity dividends b. Full premium refund without any charges c. Guaranteed surrender value d. No payments

c. Guaranteed surrender value

Which of the following is NOT true regarding the accumulation period of an annuity? a. It is the period over which the owner makes payments into an annuity b. It is also known as the pay-in period c. It would not occur in deferred annuity d. It is the period during which the annuity payments earn interest

c. It would not occur in deferred annuity

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? a. Depreciation period b. Annuitization period c. Pay-out period d. Liquidation period

a. Depreciation period

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? a. Joint limited annuity b. Joint life c. Joint and survivor d. Life with period certain

b. Joint life

What happens if a deferred annuity is surrendered before the annuitization period? a. Deferred annuities cannot be surrendered prior to the annuitization period b. The owner will receive the surrender value of the annuity c. The owner will only receive a refund of premium d. The insurer can only apply the surrender value toward another annuity

b. The owner will receive the surrender value of the annuity

Which of the following is another term for the accumulation period of an annuity? a. Liquidation period b. Annuity period c. Pay-in period d. Premium period

c. Pay-in period