Chapter 7

Which of these is an element of a Single Premium annuity?

Lump-sum payment

Which of these statements concerning an Individual Straight Life annuity is accurate?

Payments are made to an annuitant for life

Equity Indexed annuities are invested in which of the following

S&P 500 (An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index)

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)

Straight Life annuity

If an annuity is terminated prior to beginning of the income payment period, the contract owner receives

The contract surrender value at the time

Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT?

The income from the TSA is received income tax-free

Which of the following is a characteristic of a variable annuity?

Underlying equity investments

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

Variable

An immediate annuity consist of a

single premium

An individual who purchases a Life annuity is given protection against

the risk of living longer than expected

Which type of contract liquidates an estate through recurrent payments?

Annuity

G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer

Does not have to make any further payments

The type of annuity that can be purchased with one monetary deposit is called a(n)

Immediate annuity

T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?

Income that cannot be outlived by the owner

How does an indexed annuity differ from fixed annuity?

Indexed annuity owners receive credited interest tied to the fluctuations of the linked index

Variable annuities may invest premium in each of the following, EXCEPT

Insurer's corporate business account

Which of the following annuities pays benefits based on units rather than specific dollar amounts?

A Variable annuity

Which of the following is NOT included in an annuity contract?

AD&D rider

N, age 50, recently bought an annuity that will pay a guaranteed $2000/month at age 70 for life. What type of annuity did N purchase?

Fixed Deferred (pays out a fixed amount for life starting at a future date)

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?

An immediate annuity

An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called

An installment Refund annuity

What is considered to be a characteristic of an immediate annuity?

Benefits 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?

Deferred

N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?

Flexible Installment Deferred

W is a 39 year old female who just purchased an annuity to provide income for life starting at age 60. All of this would be acceptable annuity choices, EXCEPT

Immediate annuity (start providing income payments usually starting within 30 days from the purchase date.)

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?

Life Annuity with Period Certain

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

Single Premium (Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date)