Chapter 7: Annuities

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a

403(b) Plan (TSA)

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

Annuitization period

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

The annuitant must be a natural person.

What determines the penalty for surrendering a market value adjusted annuity prematurely?

The current interest rate at the time of surrender.

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

Installments for a fixed period.

An individual buys a flexible premium deferred life annuity within 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 about a joint and survivor annuity benefit option?

Payments stop after the first death among the annuitants.

Annuities can be used to fund which of the following?

Retirement plans

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.

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.

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

Creating an estate.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend

Straight life