SC Life and Health Lesson 8: Annuities

An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?

1 Month

How do interest earnings accumulate in a deferred annuity?

On a tax-deferred basis

What is the primary reason for buying an annuity?

Provide future economic security

If the annuitant dies before the annuity start date,

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

How soon can the benefit payments begin with a deferred annuity?

A minimum of 12 months after date of purchase

Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?

Accumulation Period

When does an immediate annuity begin making payments?

After the first premium has been paid

What is the nonforfeiture value of an annuity before annuitization?

All premiums paid, plus interest, minus any withdrawals and surrender charges.

Which of these is NOT considered to be a purpose of an annuity?

Annuities are not intended to create an estate

Which of the following is considered to be the period when the accumulated value in an annuity is paid out?

Annuitization Phase

Fixed period settlement options are considered to be a form of a(n)

Annuity

Maria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is called

Annuity Certain

Maria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is called?

Annuity Certain

Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?

During times of inflation, annuitants will experience a decrease in purchasing power of their payments

Which of the following is an annuity that is liked to a market-related index?

Equity-indexed Annuity

The taxable portion of each annuity payment is calculated using which method?

Exclusion Ratio

Under a non-qualified annuity, interest is taxed after the

Exclusion ration has been calculated

Fixed annuities provide each of the Following Except...

Fixed annuities do NOT provide a hedge against inflation

Which of these annuities require premium payments that vary from year to year?

Flexible Premium Deferred Annuity

How are annuities given favorable tax treatment?

Gains are taxed at distribution

An annuitant is guaranteed to NOT outlive their benefits with a(n)

Guaranteed Lifetime withdrawal benefit

Phil is shopping for an annuity that guarantees he CANNOT outlive the benefits. Which of these benefit options would he choose?

Guaranteed Lifetime withdrawal benefit

What happens to interest earned if the annuitant dies before the payout start date?

It is Taxable

Which type of annuity stops all payments upon the death of the annuitant?

Life Annuity

Which type of annuity guarantees a states 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, but no residual value to a beneficiary?

Life Income

Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?

Life Only

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 annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?

Period Certain

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

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

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

Who assumes the investment risk with a fixed annuity contract?

The Insurer

Which of these statements regarding the annuitant is CORRECT?

The annuitant's life expectancy determines the annuity payments

What will the beneficiary receive if an annuitant dies during the accumulation period?

The greater of the accumulated cash value or the total premium paid

Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's

income period

During the accumulation period, who can surrender an annuity?

policyowner

An annuity is primarily used to provide?

retirement income