Annuities
George and Virginia have an annuity that will provide benefits for George's life and then continue to provide the same amount of benefits to Virginia as his survivor. What type of annuity did George set up?
Joint life and survivorship annuity
Annuities may be purchased with all of the following EXCEPT
a single payment that may be deferred for 5 years
To sell variable contracts, a person must
be licensed for life insurance, maintain both federal and state securities licenses, and, in some states, have a specific variable annuity endorsement
James died after receiving $180 per month for 6 years from a $25,000 life with refund annuity. His spouse, Lucy, as his beneficiary, will now receive the same monthly income until her payments total
$12,040
To supplement their income in their senior years, Harold purchased a fixed immediate annuity at age 65, naming his spouse, Lucy, as the joint annuitant under a joint and 50% survivor annuity payout option that pays the couple $1,000 per month. If Harold were to die today, which of the following statements would be CORRECT?
Lucy would continue receiving monthly benefits of $500 for the remainder of her life.
Fred, age 60, has 3 years until he retires. He decides to surrender his whole life insurance policy and use the cash value to fund a single premium annuity. How many payments will he make to fund the annuity?=
1
Jessie owns a deferred fixed annuity in which the contractually guaranteed rate is 3%. The contract also has a standard current rate interest provision. If current rates are 5%, what rate of interest will be credited to Jessie's annuity?
5%
Which of the following statements regarding annuities is NOT true?
A 10% penalty on taxable earnings is levied if withdrawals are taken prior to age 72.
Tony, who is 65 and in excellent health, wants to buy an annuity with $100,000 he recently gained on the sale of his home. He wants to select an income option that will provide him the highest monthly income possible. Which annuity income option best meets Tony's objective?
A straight life annuity income option
Which of the following statements regarding an immediate annuity is NOT correct?
An immediate annuity has a long accumulation period.
Which of the following types of annuity payout options guarantees, as a minimum, the payout of the entire annuity principal amount?
Cash refund
What type of annuity payment option provides a guaranteed income to the annuitant for life and, if the annuitant dies before the annuity is depleted, a lump-sum cash payment to the annuitant's beneficiary?
Cash refund option
Larry owns a deferred annuity for which his spouse, Karen, is the designated annuitant and his son, Chris, is the designated beneficiary. If Larry were to die before the contract is annuitized, to whom would the contract's death benefit be payable?
Chris
Matteo owns a nonqualified deferred annuity that has a current value of $50,000. He has 2 children, ages 11 and 17. If he decides to devote this annuity solely to help pay for their college education, and his goal is to maximize the annuity income payments, which of the following is the best option?
Convert to an immediate annuity using a 10-year period certain annuity option
A variable annuity is based on which of the following?
Equity investments (stocks and bonds)
What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments (typically 5, 10, or 20 years), whether or not the annuitant is living?
Life with period certain
Which of the following statements regarding annuities is NOT correct?
Like life insurance, an annuity is used primarily to provide income at death.
What type of annuity settlement arrangement stops making payments when the annuitant dies?
Pure life annuity
Which of the following would NOT be required of a producer who wants to sell variable annuities?
Registration with the National Association of Insurance and Financial Advisors
Who, besides the state, regulates the sale of variable life insurance and variable annuities?
The Securities and Exchange Commission (SEC)
Which of the following statements about immediate annuities is NOT correct?
The income flow must be fixed rather than variable.
The annuitant of an annuity can be compared to which of the following with respect to a life insurance policy?
The insured
Which of the following statements regarding a variable annuity is TRUE?
The investment risk is borne by the annuitant/contract owner.
Norma and Luis are considering the purchase of an annuity for retirement. Which payout option would be the least suitable for them?
The joint life annuity option
If both an older and a younger person had annuity funds of the same amount and simultaneously began to receive monthly life payments, which individual would receive the larger payments?
The older person
When a variable annuity is purchased, who is responsible for the investment risk?
The owner
Which of the following statements regarding deferred annuities is NOT correct?
They generally permit contract owners to withdraw a specified percentage annually, tax-free and without a surrender charge.
For which of the following types of policies would premiums be invested in an insurer's separate account?
Variable annuities
Joanna and her spouse, Bill, have a $40,000 annuity that pays them $200 a month. Bill dies, and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the payments cease. This is an example of
a joint and full survivor annuity
If an annuitant has a refund annuity and dies after the annuity income begins, her beneficiary will receive
a lump-sum cash payment equal to the starting annuity fund, less the amount of income already paid to the deceased
Premiums paid into a variable annuity, after deduction for expenses, are applied regularly to purchase
accumulation units
Annuity buyers who want their product to be supported by the insurers' general accounts would most likely be looking for interest returns that
are guaranteed never to be less than the rate specified in the contract
An annuity contract owner has the right to do all of the following EXCEPT
change the interest rate
An equity-indexed annuity
has its interest tied to a stock market-related index
A principal function of annuities is to
liquidate an estate
Life insurance protects people from dying too soon, while annuities protect people from
living too long
All of the following are annuity premium factors EXCEPT
medical history
An annuity has 2 phases: the annuitization phase and
the accumulation or pay in phase
The time during which funds are being paid into an annuity is called
the accumulation period
All of the following are factors that determine the annuity benefit amount EXCEPT
the annuitant's tax bracket
The period during which annuity benefits are received is called
the annuitization period
The amount of an annuity payment depends on all of the following factors EXCEPT
the insurer's reserves
During the accumulation period of a deferred variable annuity, the value of the individual account rises or falls based on
the investment results
The owner of an annuity contract possesses all the following rights EXCEPT
to cancel a deferred annuity at any time and receive its full cash value
Contracts that provide payments based on the investment return of a segregated asset account are called
variable life insurance and annuities
Annuities are classified by all of the following EXCEPT
who issues them
Which of the following statements regarding annuities is NOT correct?
An installment refund annuity guarantees a specific amount of benefits, payable to the annuitant only; if death occurs before total payout, an amount equal to all premiums is refunded to the annuitant's estate or beneficiary.
Which of the following statements regarding the tax treatment of distributions from an individually owned, nonqualified, deferred annuity is NOT correct?
If the distribution is the result of the annuity contract owner's death, the cash value payable to the beneficiary is income tax-free.
Rick purchased an annuity, making a single lump-sum payment on September 1. His benefits began on October 1 . What kind of annuity did Rick buy?
Immediate
Which annuity settlement arrangement guarantees to pay at least a minimum amount equal to the original investment?
Installment refund annuity
Which of the following statements does NOT describe a fixed annuity?
It will produce income benefits that are adjusted to keep pace with inflation.
Variable annuities are regulated as
both insurance products and securities
