Chapter 7: Annuities

A(n) ________ annuity pays benefits based on units rather than stated dollar amounts. A. Deferred B. Variable C. Immediate D. Unit

B. Variable

A contract owner terminates an annuity before the income payment period begins. The owner will then receive A. half of the current surrender value B. the current contract surrender value C. the premiums paid to date D. nothing

B. the current contract surrender value

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 A. does NOT have to make any further payments B. MUST make full payments to the beneficiary C. MUST make half-payments to the beneficiary D. has the option to continue making payments based on what has already been paid out

A. does NOT have to make any further payments

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? A. A straight life deferred annuity B. A straight life annuity C. An immediate annuity D. A deferred annuity

C. An immediate annuity Note: An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date 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? A. Immediate B. Retroactive C. Deferred D. Universal

C. 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? A. Immediate Variable annuity B. Immediate annuity C. Deferred Fixed annuity D. Variable annuity

C. Deferred Fixed annuity

The payments on Q's annuity are no less than $250 quarterly. Which of the following annuities does Q own? A. Immediate Fixed B. Quarterly Flexible C. Flexible Installment Deferred D. Adjustable Deferred

C. 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 these would be acceptable annuity choices. EXCEPT a(n): A. Flexible Premium Deferred annuity B. Variable annuity C. Immediate annuity D. Straight Life annuity

C. Immediate annuity Note: Immediate annuities start providing income payments usually starting within 30 days from the purchase date.

Variable annuities may invest premiums in each of the following, EXCEPT: A. Common Stock B. Money Market securities C. Insurer's corporate business account D. Junk bonds

C. Insurer's corporate business account

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? A. Fixed Certain B. Joint and Full Survivor C. Life Annuity with Period Certain D. Installment Refund

C. Life Annuity with Period Certain

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds? A. Deferred B. Flexible C. Variable D. Fixed

C. Variable

The type of annuity that can be purchased with one monetary deposit is called a(n): A. Single Deposit annuity B. Single Premium annuity C. Fixed annuity D. Immediate annuity

D. Immediate annuity

Which of the following are Equity Indexed annuities typically invested in? A. Corporate Bonds B. Money Market accounts C. Municipal Bonds D. S&P 500

D. S&P 500 Note: An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index - typically the S&P 500.

What is considered to be a characteristic of an immediate annuity? A. Benefit payments start within one payment period of purchase B. Benefit payments start within 5 years of initial purchase C. Normally tied to a specific equity or stock index D. Periodical contributions begin immediately

A. Benefit payments start within one payment period of purchase

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) A. Installment Refund annuity B. Joint Refund annuity C. Straight Refund annuity D. Equal Value annuity

A. Installment Refund annuity