Chapter 9 Study Guide
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
1 month
Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phases is this annuity in ?
Accumulation period
When does an immediate annuity begin making payments?
After the first premium has been paid
Which of these is not considered to be a purpose of an annuity?
Annuities are intended to create an estate
A saving vehicle designed to first accumulate funds and then systematically liquidates the funds is called a (n)
Deferred annuity
Which of these annuities require premium payments have vary from year to year?
Flexible premium deferred annuity
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
For a minimum of 120 months and a maximum of the remainder of her life.
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's
Income period
What happens to interest earned if the annuitant dies before the payout star date?
It is taxable
What kind of annuity pays income to two annuitants until their deaths?
Joint and survivor annuity
How do interest earning accumulate in a deferred annuity?
On a tax- deferred basis
what distinguishes a deferred annuity from an immediate annuity?
The time at which benefit payments start
what is a common reason people purchase an annuity?
To protect against the risk of outliving their financial resources
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 vale of the " separate account ". What kind of annuity BEST matches this description?
Variable annuity
An annuity which is backed by a life insurer's separate account is called a( N)
Variable annuity
Cindy buys a 10-year annuity an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary?
60 payments
How soon can be benefit payments begin with a deferred annuity?
A minimum of 12 months after date of purchase
What is the nonforfeiture value of an annuity before annuitization?
All premiums paid, plus interest, minus any withdrawals and surrender charges
Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
Annuitization phase
The systematic liquidation of an sum of money is provided by a(n)
Annuity
Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?
During periods of inflation, annuitants will experience a decrease in purchasing power of their payments
Which of the following is an annuity that us linked to a market-related index?
Equity-indexed annuity
The taxable portion of each annuity payment is calculated using which method?
Exclusion ratio
an annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this?
Exclusion ratio
How are annuities given favorable tax treatment?
Gains are taxed at distribution
An annuitant Is guaranteed to NOT outlive their benefit With A(n)
Guaranteed lifetime withdrawal benefit
Phil is shopping for an annuity that guarantee he cannot outlive the benefits. Which of these benefit options would he choose?
Guaranteed lifetime withdrawal benefit
Fixed annuities provide each of the following EXCEPT
Hedge against inflammation
Which of the following is NOT a feature of equity-indexed annuities?
Offers a maximum interest rate that increases annually
What the beneficiary receive if an annuitant dies during the accumulation period?
The greater of the accumulated cash value or the total premium paid
Maria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is called
annuity certain
Under a non-qualified annuity, interest is taxed after the
exclusion ratio has been calculated
If the annuitant dies before the annuity start date,
the premiums paid plus interest earned will be given to the beneficiary
Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
Life annuity certain
Which settlement option pays a stated amount to an annuitant, butno residual value a beneficiary?
Life income
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
Life only
During the accumulation period. Who can surrender an annuity?
Policy owner
Andy the annuitant dies before the annuity start date. Which of the following is a TRUE statement?
Premiums paid plus interest earned is returned to the beneficiary
what is the primary reason for buying an annuity?
Provide future economic security
An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
Refund annuity
An annuity is primarily used to provide
Retirement Income
Which market index is normally associated with an indexed annuity's rate of return?
S&p 500
Which of these will have the highest monthly payout upon annuitization?
Straight life
Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies. This income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?
Temporary annuity certain
Which if these statements regarding the annuitant is CORRECT?
The annuitants life expectancy determines the annuity payments
Fixed period settlement options are considered to be a form of a(n)
annuity
Who assumes the investment risk with a fixed annuity contract?
insurer
Which type of annuity stops all payments upon the death of the annuitant?
life annuity
Which annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?
period certain
