Chapter 9 Exam - Annuities

Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement? 1. principal returned is taxable 2. benefits are still payable tax free to the beneficiary 3. company retains entire cash value 4. premiums paid plus interest earned is returned to the beneficiary

4. premiums paid plus interest earned is returned to the beneficiary

If the annuitant dies before the annuity start date, 1. the benefits will be given tax-free only to a stated beneficiary 2. nothing is given to the beneficiary 3. the premiums paid will be given to the beneficiary 4. the premiums paid plus interest earned will be given to the beneficiary

4. the premiums paid plus interest earned will be given to the beneficiary

When does an immediate annuity begin making payments? 1. after multiple premiums have been paid 2. after the first premium has been paid 3. after policy has been active for one year 4. after the incontestable period

2. after the first premium has been paid

A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n) 1. immediate annuity 2. deferred annuity 3. endowment 4. whole life policy

2. deferred annuity

An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? 1. mortality rate 2. exclusion ratio 3. morbidity rate 4. debt-to-equity ratio

2. exclusion ratio

What kind of annuity pays income to two annuitants until their death ? 1. period certain annuity 2. joint and survivor annuity 3. straight life annuity 4. installment refund

2. joint and survivor annuity

How do interest earnings accumulate in a deferred annuity? 1. on a tax credit basis 2. on a tax deferred basis 3. on a tax free basis 4. on a taxable basis

2. on a tax deferred basis

Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary? 1. no payments 2. 30 payments 3. 60 payments 4. 120 payments

3. 60 payments

Fixed period settlement options are considered to be a form of a(n) 1. cash value loan 2. variable life policy 3. annuity 4. endowment

3. annuity

How are annuities given favorable tax treatment? 1. gains re tax deductible 2. gains are tax exempt at distribution 3. gains are taxed at distribution 4. gains are converted to tax credits

3. gains are taxed at distribution

Which of the following is NOT a feature of equity-indexed annuities? 1. offers long term inflation protection 2. offers a minimum guaranteed rate 3. offers a max interest rate that increases annually 4. offers protection during a decline in the stock market

3. offers a max interest rate that increases annually

Which of these will have the highest monthly payout upon annuitization? 1. life with period certain 2. joint and survivor life 3. straight life 4. joint life

3. straight life

How soon can the benefit payments begin with a deferred annuity? 1. anytime after date of purchase 2. anytime within 12 months after date of purchase 3. a minimum of 6 months after date of purchase 4. a minimum of 12 months after date of purchase

4. a minimum of 12 months after date of purchase

Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments 1. for a period of time dependent on the performance of the annuity's underlying assets 2. for a max of 120 months 3. for the remainder of her life only 4. for a minimum of 120 months and a max of the remainder of her life

4. for a minimum of 120 months and a max of the remainder of her life

What is a common reason people purchase an annuity? 1. to create an immediate estate 2. to pay off a debt in the event of death 3. to minimize their tax burden 4. to protect against the risk of outliving their financial resources

4. to protect against the risk of outliving their financial resources

Which of these is NOT considered to be a purpose of an annuity? 1. annuities are intended to create an estate 2. annuities are intended to liquidate an estate 3. annuities are intended for the tax-free growth 4. annuities are intended to distribute accumulated principal

1. annuities are intended to create an estate

The systematic liquidation of a sum of money is provided by a(n) 1. annuity 2. endowment contract 3. life insurance policy 4. 1035 contract exchange

1. annuity

Which of the following annuity payout options make no additional payments regardless of when the annuitant dies? 1. life only 2. life with period certain 3. cash refund 4. installment refund

1. life only

What distinguishes a deferred annuity from an immediate annuity? 1. the time at which benefit payments start 2. the benefit payment amount 3. the taxation of benefits payments 4. the age at which the annuity can be purchased

1. the time at which benefit payments start

An annuitant would like to determine the current value of her annuity. To do this, she multiples the number of "accumulation units' she owns times the unit value of the "separate account". What kind of annuity BEST matches this description? 1. variable annuity 2. fixed annuity 3. immediate annuity 4. life annuity

1. variable annuity