7 - Annuities
The type of annuity that can be purchased with one monetary deposit is called a(n): - single deposit annuity - single premium annuity - fixed annuity - immediate annuity
Immediate annuity
Variable annuities may invest premiums in each of the following, EXCEPT: - Common Stock - Money Market securities - Insurer's corporate business account - Junk bonds
Insurer's corporate business account
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 - joint refund annuity - straight refund annuity - equal value annuity
Installment Refund annuity
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? - straight life deferred annuity - straight life annuity - immediate annuity - deferred annuity
An immediate annuity
Which type of contract liquidates an estate through recurrent payments? - universal life insurance - whole life insurance - annuity - 401(k)
Annuity
What is considered to be a characteristic of an immediate annuity? - benefit payments start within one payment period of purchase - benefit payments start within 5 years of initial purchase - normally tied to a specific equity or stock index - periodical contributions begin immediately
Benefit payments start within one payment period of purchase
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? - immediate - retroactive - deferred - universal
Deferred
A 45 year-old woman won $100,000 in a scratch-off lottery ticket. She purchased an annuity that will pay her $1,500 per month beginning at age 60. Which of these annuities did this woman purchase? - immediate variable annuity - immediate annuity - deferred fixed annuity - variable annuity
Deferred Fixed annuity
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT: - Income derived from the TSA is received income tax-free - TSA's are available to public school employees - Contributions to the TSA are tax-deductible - Interest earned by TSA is tax deferred
Income derived from the TSA is received income tax-free
How does an indexed annuity differ from a fixed annuity? - fixed annuity owners receive credited interest tied to the fluctuations of the linked index - indexed annuity owners may receive credited interest tied to the fluctuations of the linked index - fixed annuity owners have a separate investment account - indexed annuity owners receive annual dividends
Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index
An immediate annuity consists of a: - variable premium - flexible premium - single premium - deferred premium
Single Premium
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? - 403(b) - deferred premium - single premium - period certain
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 deferred annuity with period certain - flexible premium with survivor annuity - flexible premium with period certain - single premium immediate joint with survivor annuity
Single Premium Immediate Joint with Survivor Annuity
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n): - cash refund - installment refund - straight life annuity - life annuity with period certain
Straight Life annuity
A Variable Annuity has which of the following characteristics? - underlying equity investments - only available with single premium - offers a fixed interest rate - does not require an insurance license
Underlying equity investments
A(n) _____ annuity pays benefits based on units rather than stated dollar amounts: - deferred - variable - immediate - unit
Variable
A contract owner terminates an annuity before the income payment period begins. The owner will then receive: - half of the current surrender value - current contract surrender value - premiums paid to date - nothing
the current contract surrender value
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 period - fixed deferred - fixed immediate - fixed variable
Fixed Deferred
The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own? - immediate fixed - quarterly fixed - flexible installment deferred - adjustable deferred
Flexible Installment Deferred
Which of the following is NOT included in an annuity contract? - nonforfeiture benefit - free-look period - beneficiary - ad&d
AD&D rider
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): - Flexible Premium Deferred annuity - Variable annuity - Immediate annuity - Straight Life annuity
Immediate annuity
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide? - income for a fixed period stated in the contract - income that cannot be outlived by the owner - inflation protection - tax-free income
Income that cannot be outlived by the owner
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? - fixed certain - joint and full survivor - life annuity with period certain - installment refund
Life annuity with period certain
Which of these is an element of a Single Premium annuity? - deferred payment - lump-sum payment - fixed income - tax-deductible
Lump-sum payment
Which of these statements concerning an Individual Straight Life annuity is accurate? - life expectancy of the annuitant is not a factor - the payments are received tax-free - only available to employees of nonprofit charitable, educational, and religious organizations - payments are made to an annuitant for life
Payments are made to an annuitant for life
Which of the following are Equity Indexed annuities typically invested in? - corporate bonds - money market accounts - municipal bonds - s&p 500
S&P 500
What is the basic function of an annuity? - systematic liquidation of accumulated funds - guarantee of a specific sum of money to a designated beneficiary upon the death of the insured - protection against loss of income due to partial or total disability - accumulation of funds to pay for life insurance premiums during retirement years
The systematic liquidation of accumulated funds
What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? - deferred - flexible - variable - fixed
Variable
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: - does NOT have to make any further payments - MUST make full payments to the benficiary - MUST make half-payments to the beneficiary - has the option to continue making payments based on what has already been paid out
does NOT have to make any further payments
An individual who purchases a Life annuity is given protection against: - inflation - risk of dying prematurely - risk of living longer than expected - risk of not having enough retirement income
the risk of living longer than expected