Chapter 5

James is nearing retirement and has accumulated $175,000 in an annuity. He wants the largest possible monthly benefit for as long as he lives. Which option should he choose? a) Life Income b) Life Income with Refund c) Joint Life d) Fixed Amount

a) Life Income

Which Payment Option pays an income for the life of the annuitant or for a specified period, whichever is longest? a) Life Income with Period Certain b) Period Certain c) Life Income with Refund d) Life Income

a) Life Income with Period Certain

Which of the following statements is TRUE regarding Fixed Annuities? a) A securities registration (license) is required in order to sell them b) Upon annuitization, the annuity payments are level c) The contract owner bears the investment risk d) Premiums are allocated to separate account(s)

b) Upon annuitization, the annuity payments are level

The ______ is the person on whose life annuity contract's income benefit is based. a) Insured b) Beneficiary c) Annuitant d) Owner

c) Annuitant

The Payment Option that pays an income to two annuitants while both are living, and stops upon the death of the first annuitants, is which of the following? a) Life Income with Refund b) Life Income Joint and Survivorship with Period Certain c) Joint Life d) Life Income Joint and Survivorship

c) Joint Life

Under an annuity with a Joint Life Payment Option, what will the survivor receive upon the death of the first annuitant? a) The undistributed balance b) The same amount they were receiving together c) The remaining period certain d) Nothing

d) Nothing

All of the following are TRUE regarding a Variable Annuity, except: a) The number of annuity units received upon annuitization, and the unit value; remain level b) Premiums paid during the accumulation period are invested into a separate account(s) c) Upon annuitization, accumulation units are converted into annuity units, which generate income based on the value of the u nits d) The contract owner bears the investment risk and receives the return actually earned on invested assets, less any charges assessed by the insurer and investment managers

a) The number of annuity units received upon annuitization, and the unit value; remain level

Susan, age 65, inherits a substantial sum of money and wants to have the money distributed to her over the rest of her life starting next month. Which product offered by the life insurance industry will allow her to accomplish her objective? a) Flexible Premium Immediate Annuity b) Flexible Premium Deferred Annuity c) Single Premium Immediate Annuity d) Single Premium Deferred Annuity

c) Single Premium Immediate Annuit

All of the following are true regarding annuities, except: a) They can liquidate an estate b) They are used primarily to provide a steady stream of income c) They are similar to life insurance d) They are designed to protect against outliving one's income

c) They are similar to life insurance

At the time of her retirement at age 62, Jolene chose a Life Income Payment Option to have her annuity distributed. Five years later, when her health declines, she needs the distribution to be increased. How is this accomplished? a. By adding a disability income rider b. She cannot change the distribution once commenced. c. By adding a Cost of Living Rider. d. By adding an increase of benefits rider

b. She cannot change the distribution once commenced.

The annuity benefit or payment option requiring the greatest amount of capital per $1,000 of benefit is: a) Life Income Joint and Survivor 66 2/3% b) Life Income Joint and Survivor 75% c) Life Income Joint and Survivor 100% d) Life Income Joint and Survivor 50%

c) Life Income Joint and Survivor 100%

Similar to life insurance, this party has all of the rights in the annuity contract. This party is referred to as the: a) Insurer b) Annuitant c) Owner d) Beneficiary

c) Owner

Upon annuitizing an annuity, all of the following factors help in determining the amount of the income benefit payment, except: a) Settlement option b) Age c) State of residence d) Gender

c) State of residence

If an annuity uses units instead of dollars to determine the value of the policy, then it is a(n) _________ annuity. a) Indexed Annuity b) Fixed c) Guaranteed d) Variable

d) Variable

Mr. & Mrs. Smith received monthly benefits from their annuity, and upon Mr. Smith's death, Mrs. Smith receives a receives a reduced amount. What annuity payment option did they choose? a) Joint Life b) Life with Cash Refund c) Life Income Joint and Survivor d) Life Income

c) Life Income Joint and Survivor