Chapter 7 - Annuities (Chapter Exam)

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K is an annuitant currently receiving payments. If she were to die before receiving payments equal to the correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)

Installment Refund Annuity (promises that if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid)

A(n) _______ annuity pays benefits based on units rather than stated dollar amounts.

variable

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

variable

A Variable Annuity has which of the following characteristics?

Underlying equity investments

which of the following is NOT included in an annuity contract

Accidental death $ dismemberment rider

What is considered to be a characteristic of an immediate annuity?

Benefit payments start within one payment period of purchase

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)

Immediate Annuity

All of the following statements regarding a tax sheltered annuity (TSA) are true EXCEPT

Income derived from the TSA is received income tax-free (upon retirement, payments received by employees from the accumulated savings in sheltered annuities are treated as ordinary income)

T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life Annuity. What will this transaction provide?

Income that cannot be outlived by the owner

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life annuity with period certain

Which of the following are equity indexed annuities typically invested in?

S&P 500

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?

Single Premium

A contract owner terminates an annuity before the income payment period begins. The owner will then receive

The current contract surrender value

What is the basic function of an annuity?

The systematic liquidation of accumulated funds

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

fixed deferred (a fixed deferred annuity pays out a fixed amount for life starting at a future date)

T purchased a $100,000 single premium, Straight Life annuity 5 years ago. He has received monthly payments since the inception of the annuity. If T dies, the insurance company

does NOT have to make any further payments

How does an indexed annuity differ from a fixed annuity?

indexed annuity owners may receive credited interest tied to the fluctuations of the linked index

Which of these is an element of a Single Premium annuity?

lump-sum payment

Which of these statements concerning an individual straight life annuity is accurate?

payments are made to an annuitant for life

An immediate annuity consists of a...

single premium

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)...

straight life annuity

an individual who purchases a life annuity is given protection against...

the risk of living longer than expected


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