Annuities

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

It is a percentage of the cash value and decreases over time

Natural Person

human being

Deferred

withheld or postponed until a specified time or event in the future

If an annuity contract has defaulted due to nonpayment of premiums, when can it be reinstated?

within 1 year

Which of the following is true regarding variable annuities?

The annuitant assumes the risks on investment

Which of the following is NOT true regarding the annuitant?

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

Which of the following is TRUE regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred.

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

Single payment or periodic payments Annuities are characterized by how they can be paid for: either a single payment (lump sum) or through periodic payments in which the premiums are paid in installments over a period of time. Periodic payment annuities can be either level, in which the annuitant/owner pays a fixed installment, or the payments can be flexible, in which the amount and frequency of each installment varies.

What license or licenses are required to sell variable annuities?

Both a life insurance license and a securities license

Annuity

Is a contract that provides income for a specified period of years, or for life.

The term "fixed" in a fixed annuity refers to all of the following except

Death Benefit

In regards to disclosure requirements for annuity contracts, if the buyer's guide and the disclosure document are available to be printed from the insurer's Web site,

This will fulfill the disclosure requirements for applications received through the internet

When the annuity is written, whose life expectancy is taken into account?

Annuitant

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

The payments will stop when the annuitant dies. Installments for a fixed amount option has no life contingencies. A specific amount of benefits will be paid until funds are exhausted whether or not the annuitant is living.

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

The annuitant must be a natural person

IRS (Internal Revenue Service)

US government agency that is responsible for the collection and enforcement of the Internal Revenue Code

The main difference between immediate and deferred annuities is

When the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.

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

The payments will stop when the annuitant dies

Annuitant

A person who receives an annuity contract's distribution.

Which of the following will NOT be an appropriate use of a deferred annuity?

Creating an estate

The annuitant 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.

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

a fixed amount

All of the following information about a customer must be used in determining annuity suitability except

beneficiary's age

Which of the following is true regarding a market value adjusted annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

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

Annuitization period

Which of the following products will protect an individual from outliving their money?

Annuity

Life contingency

Dependent upon whether or not the insured 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

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

Which of the following statements is true regarding a waiver of a surrender charge on an annuity contract?

The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

Liquidation of an estate

converting a person's net worth into a cash flow

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity

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

The insurance company. Fixed annuities guarantee 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 company 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 its investment portfolio. The company makes conservative enough investments to insure a guaranteed rate to the annuity owners.

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

Straight life

Qualified Plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?

Bail-out

An agent selling variable annuities must be registered with

FINRA Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.

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?

Guaranteed surrender value

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?

Joint Life Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first.

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

The annuitant doesn't show 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

Fixed annuities provide all of the following EXCEPT

hedge against inflation

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 If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.

All of the following are true of an annuity owner except

The owner must be the party to receive benefits.

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?

$50,000

How long is the free-look period for an annuity contract if the buyer's guide and disclosure document are not provided at the time of application?

15 days

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

It would not occur in a deferred annuity. (The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).)

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 A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.

Which of the following is True regarding variable annuities?

The annuitant assumes the risks on investment

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant

Suitability

a requirement to determine if an insurance product is appropriate for a customer

After an annuity contract is delivered, a contract holder has a free-look period of

10 days

Which of the following is true regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred.

Within how many days must an applicant for an annuity contract receive the disclosure document and the buyer's guide if the application was not taken in a face-to-face meeting?

5 business days

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

It would not occur in a deferred annuity.

If the annuitant selects a Straight Life Annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to

Live at least to his life expectancy

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?

Payments for 15 years

Which of the following is NOt true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.