CHAPTER 8 LIFE INSURANCE

An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?

1 month

How soon can the benefit payments begin with a deferred annuity?

A minimum of 12 months after date of purchase (A deferred annuity is an annuity contract in which periodic income payments are not scheduled to begin for at least 12 months.)

When does an immediate annuity begin making payments?

After the first premium has been paid

What is the nonforfeiture value of an annuity before annuitization?

All premiums paid, plus interest, minus any withdrawals and surrender charges

Which of the following is considered to be the period when the accumulated value in an annuity is paid out?

Annuitization phase

Lisa has recently bought a fixed annuity. Which of these is considered to be a disadvantage of owning this type of annuity?

During periods of inflation, annuitants will experience a decrease in purchasing power of their payments ( The disadvantage of fixed annuities is annuitants could experience a decrease in the purchasing power of their payments over a period of years due to inflation.)

Which of the following is an annuity that is linked to a market-related index?

Equity-indexed annuity

The taxable portion of each annuity payment is calculated using which method?

Exclusion Ratio

Which of these annuities require premium payments that vary from year to year?

Flexible premium deferred annuity

Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?

Life annuity certain

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

Life income (The settlement option that pays a specified amount to an annuitant, but pays no residual value to a beneficiary is known as life income.)

Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?

Life only (The life only annuity payout option has no additional payouts regardless of when the annuitant dies.)

How do interest earnings accumulate in a deferred annuity?

On a tax-deferred basis

During the accumulation period, who can surrender an annuity?

Policyowner (The policyowner is the only one who can surrender an annuity during the accumulation period.)

An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity ( a fixed sum of money paid to someone each year, typically for the rest of their life.) value and the income payments already made?

Refund annuity (An annuity that returns the difference between the annuity value and the income payments made to a beneficiary when the annuitant dies during the distribution period is a refund annuity.)

Which market index is normally associated with an indexed annuity's rate of return?

S & P 500 (An indexed annuity rate of return is linked to a market index, like the S & P 500.)

Which of these will have the highest monthly payout upon annuitization?

Straight life

Which of these statements regarding the annuitant is CORRECT?

The annuitant's life expectancy determines the annuity payments (. Annuity payments are based on the annuitant's life expectancy.)

Fixed period settlement options are considered to be a form of a(n)

annuity

An annuity is primarily used to provide

retirement income

If the annuitant dies before the annuity start date,

the premiums paid plus interest earned will be given to the beneficiary ( If the annuitant dies before the annuity start date, the beneficiary receives the premiums paid plus interest earned.)