Annuities Chapter Quiz

Equity Index Annuities...

...seek higher returns.

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

Joint Life

A fixed annuity contract provides for...

Level benefit payment

What is false about installments for a fixed amount?

The payments will stop when the annuitant dies.

With the cash refund option, when the annuitant dies, what would the beneficiary receive?

The refund of the original amount minus payments already made.

What is NOT true regarding Equity Indeed Annuities?

They earn lower interest rates than fixed annuities.

How long will a life annuity with an installment refund pay?

Until the balance of the initial premium is paid out in continued payments to the beneficiary after the annuitant dies.

Annuities can be used to fund...

retirement plans

When an annuity is written, whose life expectancy is taken into account?

the Annuitant

What information used to determine a customers annuity suitability?

1. Annual income 2. Tax status 3. Financial experience

List 3 things that are TRUE regarding the accumulation period of an annuity?

1. Annuity payments earn interest 2. The owner makes payments into an annuity 3. It is known as the pay-in period

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?

The insurance company's general account

What is the difference between a single premium and flexible premium payment options in a deferred annuity?

The number of payments that purchase the annuity

What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

The number of payments that purchase the annuity.

What are the 3 terms used to describe the annuitant or the beneficiary receiving income.

1. Pay-out period 2. Liquidation Period 3. Annuitization period

List 3 things regarding a waiver of surrender charge on an annuity contract.

1. The charges can be waived if the annuitant needs the funds for medical expenses. 2. The surrender charge will be applied to all premature surrenders. 3. The surrender charge waiver only applies to the immediate annuity.

List 3 things that are true about equity index annuities.

1. The interest rate is tied to an index such as the Standard & Poor's 500. 2. They invest on a more aggressive basis aiming for higher returns. 3. They have a guaranteed minimum interest rate.

List 3 things that are TREU regarding the annuitant?

1. The life expectancy is taken into consideration for the annuity. 2. Receives the annuity benefits. 3. The annuitant must be a natural person

An insurance company forwards annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policy holders?

2.5%

What provision in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?

Bail-out

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Why can't he do this?

Because the annuitant must be a natural person

Which of the following is a true comparison between annuities and life insurance?

Both annuities and life insurance use mortality tables.

What type of annuity promises to pay to a beneficiary, in a lump sum, the difference between the amount paid into the contract and the benefits received prior to the annuitant's death?

Cash refund annuity

What will be an inappropriate use of a deferred annuity?

Creating an estate

What is NOT appropriate use of a deferred annuity?

Creating an estate.

What. do annuities NOT fund?

Death benefits

What is NOT true regarding the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount.

An agent selling variable annuities must be registered with...

FINRA

The annuity purchased with multiple payments, whose benefit is paid more than one year after the purchase is known as which type of annuity?

Flexible Premium Deferred Annuity

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

Guaranteed surrender value

What type of annuity guarantees to pay an income to the annuitant each year as long as he lives, and upon death, the annuity will refund the remaining payments to a beneficiary?

Installment refund annuity

What type of annuity guarantees to pay an income to the annuitant each year as long has he lives, and upon death, the annuity will refund the remaining payments to a beneficiary?

Installment refund annuity

What determines the interest rates paid to the owner of a fixed annuity?

Insurer's guaranteed minimum rate of interest.

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

It has a guaranteed minimum interest rate.

What is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant

How long is the annuity period?

It may last for the lifetime of the annuitant.

Which of the following is TRUE regarding the annuity period?

It may last for the lifetime of the annuitant.

What is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

Joint and Survivor

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?

Payments for 15 year years.

Annuities can be used to fund which plan?

Retirement plan

Annuities can be used to fund which of the following?

Retirement plans

List 3 statements that are true regarding installments for a fixed amount.

1. The value of the account and future earning will determine the time period for the benefits. 2. The option pays a specific amount until the funds are exhausted. 3. The annuitant may select how big the payments will be.

If a person purchases a Flexible Premium Deferred Annuity, when is the soonest that income payouts will begin?

After 1 year

In flexible premium payment plans, the term "flexible" refers to the...

Amount of premium

In flexible premium payment plants, the term "flexible" refers to the...

Amount of premium

In the flexible premium payment plans, the term "flexible" refers to...

Amount of premium

The minimum interest rate on an equity indexed annuity is often based on...

An index like Standard & Poor's 500

What is NOT true regarding the annuitant?

The annuitant cannot be the same person as the annuity owner.

In a fixed annuity, what interest rate is guaranteed in a investment?

The annuitant will receive the higher of either the guaranteed minimum rate or current rate.

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

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

The annuitant dies while the annuity is still in the accumulation stage. What happens to the annuity?

The beneficiary will received the great of the money paid into the annuity of the cash value.

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. What happens to the cash value?

The cash value will be paid to the annuitant's estate.

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?

The cash value will be paid to the annuitant's estate.

What is true regarding a waiver of surrender charge on an annuity contract?

The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.