9 - Annuities

What are the 2 premium payment options in annuities?

1) Single Payment 2) Periodic Payment

How long will a life annuity with 15-year period certain pay benefits?

15 years - # of years the Annuitant was receiving benefits.

How soon can payments begin in a deferred annuity?

After 1 Year

In a fixed annuity, how are the guaranteed and current interest rate related?

The Annuitant is paid the higher of the two rates.

What happens to the contract value if the owner decides to surrender a deferred annuity prior to annuitization?

They are charged a *Surrender Value*.

Describe an Equity Indexed Annuity.

- Invested fairly aggressively - Guaranteed minimum interest rate. - Interest rate is tied to a familiar index like Standard and Poor's 500.

An annuity has 2 distinct periods. What are they called, and what happens during each?

1) Accumulation Period (Pay-In Period) 2) Annuity Period (Annuitization Period, Liquidation Period, Pay-Out Period)

Who has all of the rights in an Annuity Contract?

Owner of the Annuity

What happens to the benefit if the annuitant dies during the accumulation period?

Their *Beneficiary* is paid out either the amount paid into the plan, or the cash value of the plan. Whichever is greater.

How do Annuities differ from Life Insurance policies?

Annuity: Retirement plan. Money is put in and invested by the Insurance Company, then paid back out on a schedule the Annuitant chooses. Life: Premiums are paid in during life and benefits are returned after death.

How is the surrender value of a deferred annuity calculated?

As a *%* of the *Cash Value* and decreases over time.

Where are premiums invested in a fixed annuity?

Into the life insurance company's General Account. Mostly comprised of Bonds.

How does inflation affect the purchasing power of a fixed annuity?

It may be *Eroded* over time as inflation rises.

What type of annuity payout option will pay 2 people until one dies and then pay a reduced amount to the surviving person until they die?

Joint Survivor