Annuities Quiz Questions

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? A. The annuitant must be a natural person B. A corporation can be an annuitant as long as it is also the owner C. A corporation can be an annuitant as long as the beneficiary is a natural person D. The contract can be issued without an annuitant

A. The annuitant must be a natural person. - Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be? A. Installments refund B.Cash Refund C.Installments for a fixed period D.Installments for a fixed amount

C. Installments for a fixed period - under this option, the annuitant selects the time period for the benefits, and the insurer determines how much each payment will be. This option pays for a specific period of time only, and there are no life contingencies.

Which of the following are NOT fundable by annuities? A. Cash accumulation for any reason B. A person's retirement C. Estate liquidation D. Death Benefits

D. Death Benefits - Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.

What license or licenses are required to sell variable annuities? A. Only a securities license B. No license is required C. Both a life insurance license and a securities license D. Only a life insurance license

C. Both life insurance license and a securities license - Agents are required to have both a life insurance license and a securities license to sell variable annuities.

Which of the following statements is incorrect regarding IRA's? A. A nonworking spouse is eligible to contribute to a separate IRA account B. Anyone with earned income under the age of 70.5 may open a traditional IRA. C. Accumulated contributions grow tax deferred D. Married couples are required to purchase a jointly owned IRA

D. Married couples are required to purchase a jointly owned IRA. - Anyone with earned income who has not attained age 70.5 can have an IRA. A married couple could currently contribute up to $11,000 per year to two separate accounts.

When an annuity is written, whose life expectancy is taken into consideration? A. Owner B. Annuitant C. Beneficiary D. Life expectancy is not a factor in writing annuity

B. Annuitant - the annuitant receives payments from an annuity and is the person whose life expectancy is considered when writing the contract. the annuitant and annuity owner are often the same person but do not have to be.

An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n): A) Keogh Plan. B) Roth IRA. C) SEP. D) 403(b) Plan (TSA)

D. 403(b) Plan (TSA) - Under the 403(b) plan, tax-sheltered annuities may be established for the employees of specified nonprofit charitable,educational,religious and other 501c(3) organizations, including teachers in public schools systems. Such plans generally are not available to other kinds of employees.

What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? a) Joint and survivor b) Pure life c) Life with guaranteed minimum d) Installment refund

D. Pure life - A Pure life annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.

Which of the following best describes what the "annuity period" is? a) The period of time spanning from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time spanning from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments

D. The period of time during which accumulated money is converted into income payments. - The annuity period is the time during which accumulated money is converted into an income stream.

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? A. The annuitant will always receive the current interest rate. B. The annuitant will receive the lower of either the guaranteed minimum rate or current rate. C. The annuitant will only receive the guaranteed minimum specified in the contract. D. The annuitant will receive the higher of either the guaranteed minimum rate or current rate.

D. The annuitant will receive the higher of either the guaranteed minimum rate or current rate. - With a fixed annuity, the insurer invests the principal and gives the annuitant a guaranteed interest rate based on a minimum rate specified in the annuity, or current interest rate, whichever is higher.

Which of the following is True regarding the accumulation period of an annuity? A. I is a period of time during which the beneficiary receives income B. It is limited to 10 years C. It is a period during which the payments into the annuity grow tax deferred. D. It is also referred ti as the annuity period

C. It is a period during which the payments into the annuity grow tax deferred. - The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.

All of the following employees may use a 403(b) plan for their retirement EXCEPT: A. A school bus driver B. A part-time classroom aide C. The vice president of a charitable organization D. The CEO of a private corporation

D. The CEO of a private corporation. - not all public employees are eligible for 403(b) plans, or tax-sheltered annuities, only employees of public education (local,state, or federal). as well as employees of charitable organizations.