NAIC390

If an annuitant surrenders his or her contract before reaching age 59 1/2, a ____________ premature-distribution tax penalty will apply.

10%

The following are included in the insurer's seperate account EXCEPT __________.

A fixed account.

Brandon owns mutual funds in his IRA and is considering buying a variable annuity. His agent explains that the "_____________" of the variable subaccounts are equivalent to the "shares of a mutual fund.

Accumulation units.

A producer must have a reasonable basis to believe that the customer has been informed of the material features of an annuity. Which of the following should be discussed?

All of the above.

Other NAIC models include which of the following?

All of the above.

The 2010 changes adopted to the Model Regulation ______.

All of the above.

Under the Suitability in Annuity Transactions Model Regulation, when recommending a variable annuity the insurer or producer must have a reasonable basis to believe that ___________.

All of the above.

Which of the following statements is TRUE?

An indexed annuity can be either immediate or deferred.

The NAIC is:

An organization made up of state insurance commissioners.

The payout phase of an annuity is also called the _______ phase.

Annuitization.

John has paid monthly annuity premiums for 20 years. He has now retired and has begun taking payments from the annuity. John has just ______________ the annuity.

Annuitized.

Theresa is considering buying an indexed annuity. Her agent explains that there is a maximum she can earn on the index-linked interest rate. The maximum limit is called a _______________.

Cap rate.

It is common for these two parties to an annuity contract to be the same person.

Contract owner and annuitant.

Which of the following client goals would most likely NOT be served by an annuity?

Desire for a product with maximum short-term liquidity.

Which of the following describes an annuity that guarantees the payout so that, should the annuitant die before an amount equal to the annuity value is paid out, the remaining value is paid to the designated beneficiary?

Fixed-amount annuity.

A fixed annuity guarantees a ______________ in the form of periodic payments to the annuitant for a term specified in the contract.

Fixed-dollar benefit.

Insurance companies use funds in the ___________ to support their obligations for fixed-dollar benefits such as those guaranteed in a fixed annuity.

General account.

Many of the restrictions imposed by the Glass-Steagall Act and the Bank Holding Company Act were eased or eliminated by the Financial Modernization Act of 1999, commonly referred to as the _______.

Gramm-Leach-Bliley Act

With this type of variable annuity living-benefit guarantee, the insurer promises a fixed lifetime payment calculated a hypothetical benefit base even if the contract performs poorly.

Guaranteed minimum income benefit.

In reference to indexed annuities, the terms annual reset, high-water mark, low-water mark, and point-to-point refer to ____________.

Index methods.

Indexed annuities, like other annuities, are ________.

Insurance contracts.

Benefits of older annuities that may be lost in a non-Section 1035 exchange include all of the following EXCEPT ___________.

LIFO income-tax treatment of withdrawals.

Mortality and expense risk charges are designed to offset the insurer's risk that the annuitant will outlive his or her

Life expectancy.

Kate chooses a payment option that will guarantee payments for her lifetime but with an additional guarantee that payments will be made for at least 10 years should she die before then. This is referred to as a(n) ___________ payout.

Life with period-certain.

Annuity surrender charges, surrender periods and taxes on premature withdrawals effectively limit a consumer's ____________.

Liquidity.

An annuity may be suitable for a client with a _______.

Long-term retirement goal.

Insurance companies use funds in the ___________ to hold assets that support their variable annuity contracts.

Seperate account.

Marcy selects a payment option on her annuity that provides for payments to continue for her lifetime, regardless of how long or short that may be. This is referred to as a ____________ payout.

Straight life.

Anne purchases an annuity to fund her retirement. She plans to work another 20 years. She is told there is a charge to take her money out early and that this charge will decrease incrementally over the next seven years, This period is called the ________.

Surrender period.

Which of the following do(es) NOT result in an annuity's limited liquidity?

The availability of crisis waivers.

You are considering recommending an annuity transaction to your client. Whether the customer would incur a surrender charge, be subject to the commencment of a new surrender period, lose existing benefits or be subject to increased fees or charges, and/or benefit from product enchancements and improvements are additional suitability factors you must weigh before recommending ________.

The exchange of a variable annuity.

Which of the following is NOT true of an immediate annuity?

The insurer faces no risk.

Regarding indexed annuities, the participation rate is best described as:

The percentage of increase in the index that will be used to calculate the index-linked interest rate.

Which of the following statements regarding IRS Section 1035 tax-free exchanges is correct?

The replaced and replacing contracts must have the same annuitant.

Starting in the 1970s, issuers began offering _________ insurance products that offered the potential for greater returns through the inclusion of an investment component.

Universal life.

Variable annuities offer investment options through a variety of ___________ that have a range of investment objectives to match consumer's risk tolerances, time horizons, and goals.

Variable subaccounts.

A customer whose time horizon is long enough to make a deferred annuity potentially suitable would meet all of the following criteria EXCEPT that he or she ___________.

Will not need the funds until age 70 1/2.

The ____________ was aimed at creating safeguards against future financial calamities b mandating that the functions of lending and investing not be undertaken by the same entity.

Glass-Steagall Act.

The main difference between the general and seperate accounts is the assumption of ___________ risk.

Investment.

Regulation of nonregistered products such as traditional life insurance and fixed annuities:

Is handled by state regulators.

The GMAB is the guaranteed minimum amount received by the annuitant after the accumulation period or some other specified period, which is either the amount invested or _______, regardless of seperate account performance.

Is locked in gain.

By creating a shared-risk pool - a fixture of most types of insurance - the fixed annuity will even out the _________ of the participants.

Mortality rates.

By creating a shared-risk pool, a fixed annuity evens out the ______ of the participants.

Mortality risk.

Decades ago an individual could not invest, at least not in a diversified manner, unless he or she could afford to buy a large portfolio of individual equities. Today, however, ___________ make diversified portfolios readily accessible to average investors.

Mutual funds.

For any recommended annuity replacement to be suitable, the producer must show that the client will see a ___________ as a result.

Net benefit.

Unlike a certificate of deposit, a fixed annuity does not have _________.

Federal deposit insurance.

Under some crisis situation, an annuity contract may waive surrender charges. Which of the following would NOT qualify for a crisis waiver?

Financial hardship.

The person designated to receive the death benefit of an annuity is the _______.

If you don't know this, shame on you. Beneficiary.

Tax advantages of annuities include __________.

Tax-deferred accumulations.

Variable annuities are subject to regulation by all of the following EXCEPT:

The FDIC.