Annuities

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

Nonforfeiture option guarantees that the owner will receive a surrender value of the contract

Which of the following is NOT true regarding the annuitant? a. The annuitant receives the annuity benefits b. The annuitant must be a natural person c. The annuitant cannot be the same person as the annuity owner. d. The annuitant's life expectancy is taken into consideration for the annuity.

The annuitant cannot be the same person as the annuity owner

The president of a company is starting an annuity and describes that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is the money placed?

The insurance company's general account

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate

All of the following statements about equity index annuities are correct EXCEPT a. The annuitant receives a fixed amount of return b. They have a guaranteed minimum interest rate c. The interest rate is tied to an index such as the Standard & Poor's 500 d. They invest on a more aggressive basis aiming for higher returns

a) The annuitant receives a fixed amount of return

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The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or the cash value

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?

Individual

Which of the following is NOT true about a group annuity? a. It can be owned by individual employees b. It can be noncontributory c. It can be qualified d. It can be tax deferred

a) It can be owned by individual employees

Which of the following is NOT true regarding Equity Indexed Annuities? a. They earn lower interest rates than fixed annuities b. The insurance company keeps a percentage of the returns c. They have guaranteed minimum interest rates d. They are less risky than variable annuities

a) They earn lower interest rates than fixed annuities

Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that the annuity owner will have to pay?

Current interest rate at the time of surrender

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive the benefits

Which of the following is another term for the accumulation period of annuity?

Pay-in Period

Which of the following is TRUE regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, which of the following is most likely to occur?

The owner will receive the premium payments that have been paid into the annuity, plus any interest, minus a surrender charge

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

The surrender charge is a percentage of the cash value and decreases over time

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the non forfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges

Which of the following will NOT be an appropriate use of a deferred annuity? a. Accumulating retirement funds b. Accumulating funds in an IRA c. Funding a child's college education d. Creating an estate

d) Creating an estate

In reference to fixed annuities, what compromises most of a life insurance company's general account?

Conservative investments like bonds