AD Banker Chapter 5 Quiz

Annuities and life insurance are similar in all of the following ways, except:

Both use the same term to identify the person whose life is the subject of the contract

A producer needs a securities registration/license in order to sell which of the following annuities?

Variable

All of the following annuities can be sold without a securities registration/license, except:

Variable

Which of the following annuities typically offers no guarantees?

Variable

When does the annuitization period begin?

When the policyowner elects to convert the annuity into an income benefit payment

What do both life insurance and annuities have in common?

Both are products based on a mortality table

What type of annuity is designed to start benefit payments many years from now and subjects the owner to investment risk?

Deferred variable

An annuity policyowner has all of the following rights, except:

Determine the mortality table to use

Annuity income benefit payments are based on all of the following, except:

Education Level

Jill wants to know how much to put into her annuity in order to receive the greatest benefit payment amount. Which of the following will provide her with the largest monthly income regardless of the settlement option selected?

$1,000,000

There is/are ______ ways to fund an annuity.

3

A Variable Annuity is different from a Fixed Annuity because it must be sold with which of the following documents?

A prospectus

The annuity benefit or payment option requiring the greatest amount of capital per $1,000 of benefit is:

Life Income Joint and Survivor 100%

A Single Premium Immediate Annuity (SPIA) begins paying out its benefit:

No later than within 1 year

The annuity __________ option selected can provide a temporary or lifetime payment.

Settlement

All of the following are traits of a Fixed Annuity, except:

The actual rate of interest credited will be based on the state-published interest rate index

If Robert wishes to cash out his annuity at age 70 after having it for over 40 years, what should he know about prior to doing it?

The amount of tax-deferred earnings will now become taxable

In which of the following circumstances is an annuity's tax-deferral benefit lost?

The annuity is owned by a corporation

What is an annuitant, in regard to an annuity policy?

The party whose life the policy's benefits are based on

Only the _________ can surrender an annuity.

Owner

Similar to life insurance, this party has all of the rights in the annuity policy. This party is referred to as the:

Owner

Which of the following annuity funding methods requires a constant premium?

Periodic

Upon annuitizing an annuity, all of the following factors help in determining the amount of the income benefit payment, except:

State of Residence

Gloria needs to use her annuity as a long-term savings plan rather than as a short-term tax shelter, otherwise she will incur a ____% penalty tax against any taxable withdrawals prior to age 59 1/2.

10%

Unless an exception applies, a tax penalty is assessed for withdrawals from annuities of tax-deferred earnings prior to age ______.

59 1/2

The annuity pay-in period is also referred to as the ________ period.

Accumulation

The period of time from the first deposit into an annuity to the selection of a settlement option is considered the ___________ period.

Accumulation

Sam wants to know at what age he should select a settlement option in order to receive the highest monthly income benefit payment. Which of the following will meet his objective regardless of the settlement option selected?

Age 70

With a Life Income Payment Option, what happens at the annuitant's death?

All payments cease

_____________ means ensuring that an annuity addresses a prospective owner's needs and financial objectives at the time of the sale.

Suitability

All of the following are benefits an annuity can provide that other investment or savings products cannot, except:

Tax-free distributions

A(n) ________ has all of the contractual rights in an annuity policy.

Owner

Before taking an application for an annuity, it is important to:

Determine the suitability of the product to the intended purchaser

Mr. Zamboni is the owner and the annuitant of an annuity. Mrs. Zamboni, the designated beneficiary, will be able to assume all ownership rights and tax-deferral if Mr. Zamboni should die ___________.

During the Accumulation Period

A(n) __________ annuity has its interest credit linked to the positive performance of a stock market index.

Equity Indexed

Which annuities are directly affected by a 'bullish' stock market?

Equity-Indexed and Variable

An annuity that is purchased with contributions made as often and in whatever amounts the owner wishes, subject only to the insurer's minimums and maximums, is called:

Flexible Premium Annuity

If Alan owns a market value adjustment annuity (MVA) and interest rates have fallen since he has taken out the policy, what impact will this have on the policy values?

In effect, the policy values would have increased

Which of the following annuities is known for having the highest surrender charge percentages and the longest surrender charge time periods?

Indexed Annuities

If an annuity lifetime benefit is selected in most cases, it is an _________ election.

Irrevocable

Annuities are classified in all of the following ways, except:

Issuer of the annuity

The Payment Option that pays an income to two annuitants while both are living, and stops upon the death of the first annuitant, is which of the following?

Joint Life

Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options?

Life Income Joint and Survivor

The annuity settlement option that pays out the highest monthly income for as long as the annuitant lives, and leaves no residual value upon the annuitant's death, is the:

Life Income Option

Which Payment Option pays an income for the life of the annuitant or for a specified period, whichever is longest?

Life Income with Period Certain

Which of the following statements is TRUE regarding Fixed Annuities?

Upon annuitization, the annuity payments are level

Which of the following is TRUE regarding Indexed Annuities?

Values and benefits may increase, but not decrease

If an annuity uses units instead of dollars to determine the value of the policy, then it is a(n) _________ annuity.

Variable

The insurer generally assumes the investment risk in all of the following annuities, except:

Variable

Which of the following is not a fixed type of an annuity?

Variable

The __________ is the person on whose life the annuity contract's income benefit is based.

Annuitant

The pay-out period of an annuity is also referred to as the ______ period.

Annuity

Only a(n) __________ can guarantee to provide an income benefit payment for as long as the annuitant is alive.

Insurer

_____________ are allowed as a way to access annuity values without having to elect a settlement option or surrender the contract.

Systematic withdrawals

From a tax standpoint, what is the benefit of receiving income benefit payments as opposed to cashing out an annuity after it has been held for several decades?

Taxes are only due on the amount of tax-deferred earnings in each payment

All of the following are TRUE regarding a Variable Annuity, except:

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

Primarily, the _________ is the person who will receive any residual policy benefits after the annuitant has died

Beneficiary

Primarily, the _________ is the person who will receive any residual policy benefits after the annuitant has died.

Beneficiary

All of the following are factors for a producer to consider when determining annuity suitability for a client, except:

Commission

Jasmine has deposited $100,000 into a single premium immediate annuity. If Jasmine were to die before receiving $100,000 in payments, the balance of the $100,000 would be paid to her sister. Jasmine has selected the:

Life Income with Refund Option

All else being equal, which of the following will receive the largest income benefit payment from an annuity?

Male age 80

An annuitant owns an annuity that has been in force for 4 years. The policy has a 10-year surrender charge associated with it. If the annuitant suffered a long-term disability and used the funds from the annuity as a result, what surrender charges would be assessed?

No surrender charge would be applied

Under which of the following plans can an annuity be funded up to the limits set by the insurer rather than by the IRS?

Nonqualified

All of the following are ways in which an annuity can be classified based on its premium funding method, except:

Reinvestment

An individual owns a variable annuity. Upon annuitization, the number of Annuity Units on which the benefit amount is based will __________ from month to month.

Remain the same

Annuities are primarily designed to accumulate funds for a(n) _________ fund.

Retirement

If Charlotte wishes to cash out her annuity at age 58 after having it for over 20 years, what should she know about prior to doing it?

She will face income tax consequences and tax penalties

Y just received an inheritance and instead of spending the money right now, decides to put it away for the future. What annuity premium funding would be best in this situation?

Single

Which of the following annuities does not have a traditional accumulation phase?

Single Premium Immediate

If an annuity is purchased in December and monthly benefits begin in January of the following year, what type of annuity is it?

Single Premium Immediate Annuity

Which of the following annuities does not have a traditional accumulation phase?

Single premium immediate

What is the difference between the cash value and the cash surrender value of an annuity?

The surrender charge

Which of the following do Fixed and Variable Annuities have in common?

The types of settlement options available at annuitization

All of the following are true regarding annuities, except:

They are similar to life insurance

What is the primary purpose of an annuity?

To protect against outliving one's income