5 - 02232023 - Review Chapter - Annuities

Variable Annuity

A ___________ Annuity is considered to be a security, and is regulated by the Securities Exchange Commission SEC in addition to state insurance regulations. For that reason, a person must hold a securities license in addition to a life agents license in order to sell variable annuities.

This owner must be the party to receive benefits.

All of the following are true of an annuity owner EXCEPT

Annuity Period

Also known as the annuitization period, liquidation period, or pay out period, is the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant. The annuity period may last for the lifetime of the annuitant or for a specified period, which could be longer or shorter.

Equity Indexed Annuities

Are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the equity index annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar Index like the Standard and Poors 500.

Seek higher returns

Equity Indexed Annuities...

hedge against inflation

Fixed annuities provide all of the following EXCEPT

Accumulation Period

If an annuitant dies during the ____________ Period, the beneficiary is paid either cash value of the policy or the amount of premiums paid, whichever is the larger amount. In this case, a beneficiary is not named, so the cash value will be paid to the annuitant's estate.

Accumulation Period

If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater.

The Beneficiary

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

Deferred Annuities

May be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until something after 1 year from the date of purchase.

Pure Life Annuity

Provides the highest monthly benefit, but there is no guarantee that the entire Principle will be paid out.

Straight Life

Pure and _____________ Annuity settlement option will only pay for as long as the annuitant lives; therefore, it has the potential to provide the highest monthly income. Anytime a "Period Certain" option is included, it will reduce the monthly payout amount because, even if the annuitant dies, the inland must continue to pay benefits for the period certain.

Variable Annuity

Serves as a hedge against inflation, and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity.

Annuitization Period

The ______________ Period (annuity period) is the time during which accumulated money is converted into an income stream.

Accumulation Period

The ________________ Period is also known as the pay-in period. It is the period of time over which the annuitant makes payments (premiums) into an annuity.

The cash value will be paid to the annuitant's estate.

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?

Annuity

The owner is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.

Variable Annuity

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

Annuitant

The person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written. The Newton and the contract owner do not need to be the same person, but most often are. Corporation, trust or other legal entity, may own an annuity, but the annuitant must be a natural person.

Death Benefit

The term "Fixed" in a Fixed Annuity refers to all of the following EXCEPT

It does not guarantee that the entire principal amount will be paid out.

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?

It would not occur in a deferred annuity

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

The annuitant assumes the risks on investment.

Which of the following is TRUE regarding variable annuities?

Pay-in Period

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

Variable Annuity

Which of the following products requires a securities license?

Straight Life

Which of the following types of annuities will generally provide the highest monthly income?

The insurance Company

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

Deferred

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?

Life with Guaranteed Minimum

With this ___________________ Annuity settlement option, if the annuitant dies before the principal amount, (the amount paid for the annuity) has been paid out, the remainder of the principal amount will be refunded to his or her beneficiary. Pure life provides the highest monthly benefits for an individual annuitant.

Fixed Annuities

Guarantees a minimum amount of interest to be credited to the purchase payment. Income payments do not vary from one payment to the next. The insurance implant 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 the it's investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owner.

Annuitization Period

In an annuity, the accumulated money is converted into a stream of income during what time period?

Fixed Annuities

Invest premium payments into general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power and therefore providing protection against inflation.

Fixed Annuity

This __________ Annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a DEATH BENEFIT.

Accumulation Period

This ___________ Period of time over which annuity owner makes payments (premiums) into an annuity. This the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity)