Annuities

A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? A. Flexible B. Deferred C. Variable D. Immediate

D. Immediate

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option? A. It is a life contingency option B. The beneficiary receives the remainder of the principal amount upon the annuitant's death C. Payments can be made in installments and as a single cash refund D. It does not guarantee that the entire principal amount will be paid out

D. It does not guarantee that the entire principal amount will be paid out

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a A. Joint and survivor annuity B. Deferred annuity C. Pure annuity D. Joint life annuity

D. Joint life annuity

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive A. Guaranteed minimum benefit B. The amount paid into the annuity C. The remainder of the principal D. Nothing; the payments will cease

D. Nothing; the payments will cease

If the annuitant dies during the accumulation period, who will receive the annuity benefits? A. The annuitant's estate B. The beneficiary C. The annuity owner D. The insurance company

B. The beneficiary

Annuities can be used to fund which of the following? A. Group life insurance B. Estate creation C. Retirement plans D. Variable life insurance

C. Retirement plans

Which of the following types of annuities will generally provide the highest monthly income? A. Installment refund B. Life with a 10-year period certain C. Straight life D. Joint and survivor

C. Straight life

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

D. Annuitant

Which of the following is TRUE for both equity indexed annuities and fixed annuities? A. They are both tied to an equity index B. Both are considered to be more risky than variable annuities C. They invest on a conservative basis D. They have a guaranteed minimum interest rate

D. They have a guaranteed minimum interest rate

Which of the following is a short-term annuity that limits the amount paid to a certain fixed period or until a certain fixed amount is liquidated? A. Annuity certain B. Fixed annuity C. Refund life D. Variable annuity

A. Annuity certain

Which of the following best describes a pure life annuity settlement option? A. Benefits are paid for a fixed period of time, specified when the policy begins to pay B. Pure life provides payments for as long as both the annuitant is alive C. Pure life provides payments for as long as the annuitant is alive D. Pure life guarantees that all the proceeds will be paid out

C. Pure life provides payments for as long as the annuitant is alive

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend A. Joint and survivor B. Straight life C. Life income with period certain D. Installment refund

B. Straight Life

Which of the following is true regarding a market adjusted annuity? A. It provides a level benefit payment B. The owner is guaranteed a fixed interest rate for a specific period of time C. The insurer bears all the market risk of changing interest rates D. There are no penalties for a premature surrender of the annuity

B. The owner is guaranteed a fixed interest rate for a specific period of time

The minimum interest rate on an equity indexed annuity is often based on A. The annuitant's individual stock portfolio B. The insurance company's general account investments C. An index like Standard and Poor's 500 D. The returns from the insurance company's separate account

C. An index like Standard and Poor's 500

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficary. Considering both contracts, how much will the annuitant's spouse receive in benefits? A. $50,000 B. $62,500 C. $75,000 D. Nothing

A. $50,000

Which of the following is NOT true regarding an annuity certain? A. Benefits will stop at the annuitant's death B. It will pay until a fixed amount is liquidated C. There are no life contingencies D. It is a short-term annuity

A. Benefits stop at the annuitant's death

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? A. Fixed amount B. Variable period C. Variable amount D. Fixed period

A. Fixed amount

Which of the following is NOT true regarding the accumulation period of an annuity? A. It would not occur in a deferred annuity B. It is the period during which the annuity payments earn interest C. It is the period over which the owner makes payments into an annuity D. It is also known as the pay-in period

A. It would not occur in a deferred annuity

Which of the following will NOT be an appropriate use of a deferred annuity? A. Accumulating retirement funds B. Accumulating funds in an IRA C. Funding a child's college educated D. Creating an estate

D. Creating an estate

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? A. Fixed B. Flexible premium C. Immediate D. Deferred

D. Deferred

If a beneficiary is NOT named for annuity benefits, to which entity will the benefit be paid? A. The next of kin B. The state government C. The insurance company D. The annuitant's estate

D. The annuitant's estate

In an annuity, the accumulated money is converted into a stream of income during which time period? A. Annuitization period B. Payment period C. Amortization period D. Conversion period

A. Annuitization period

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity? A. Investment performances of the insured B. Statewide predetermined annual interest rate C. Insured's guaranteed minimum rate of interest D. Investment performance of the company

C. Insurer's guaranteed minimum rate of interest

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT A. The payments are not guaranteed for life B. The insurer determines the amount for each payment C. It is a life contingency option D. It will pay the benefit only for a designated period of time

C. It is a life contingency option

Which of the following is NOT true regarding Equity Indexed Annuities? A. They have a guaranteed minimum interest rates B. They are less risky than variable annuities C. They earn lower interest rates than fixed annuities D. The insurance company keeps a percentage of the returns

C. They earn lower interest rates than fixed annuities

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy? A. Life with period certain B. Joint limited annuity C. Joint life D. Joint and survivor

C. Joint life

Under a pure life annuity, an income is payable by the company A. For a guaranteed period of time, whether or not the annuitant survives to the end of that period B. For as long as either the annuitant or a named beneficiary is alive C. Only for the life of the annuitant D. Until the principal and interest are exhausted

C. Only for the life of the annuitant

If an annuitant dies before annuitization occurs, what will the beneficiary receive? A. Cash value of the plan B. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount C. Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount D. Amount paid into the plan

B. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? A. The annuitant will always receibe the current interest rate B. The annuitant will always 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

All of the following are true of an annuity owner EXCEPT A. The owner must be the party to receive benefits B. The owner pays the premiums of the annuity C. The owner has the right to name the beneficiary D. The owner is the party who may surrender the annuity

A. The owner must be the party to receive benefits

Which of the following is NOT true regarding Equity Indexed Annuities? A. The insurance company keeps a percentage of the returna B. They have a guaranteed minimum interest rates C. They are less risky than variable annuities D. They earn lower interest rates than fixed annuities

D. They earn lower interest rates than fixed annuities

Which of the following is TRUE regarding the annuity period? A. It is also referred to as the accumulation period B. It is the period of time during which the annuitant makes premium payments into the annuity C. It may last for the lifetime of the annuitant D. During this period of time the annuity payments grow interest tax deferred

C. It may last for the lifetime of the annuitant

An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a A. Flexible Annuity B. Immediate Annuity C. Equity Indexed Annuity D. Variable Annuity

C. Equity Indexed Annuity

All of the following statements are true regarding installments for a fixed amount EXCEPT A. This option pays a specific amount until the funds are exhausted B. The annuitant may select how big the payments will be C. The payments will stop when the annuitant dies D. Value of the account and future earnings will determine the time period for the benefits

C. Payments will stop when the annuitant dies

Which two terms are associated direcrtly with the way an annuity is funded? A. Immediate or deferred B. Renewable or convertible C. Single payment or periodic payments D. Increasing or decreasing

C. Single payment or periodic payments

What determines the penalty for surrendering a market value adjusted annuity prematurely? A. There are no penalties imposed for surrendering annuities prematurely B. The guaranteed minimum interest rate provided in the contract C. The current interest rate at the time of surrender D. The flat fee determined by an index of interest gains and the amount of time the annuity would take to mature

C. The current interest rate at the time of surrender

An insurance company forwards fixed annuity premiums to their general acocunt, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders? A. 2% B. 2.5% C. 3% D. Whatever interest rate the company deems appropriate

B. 2.5%

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? A. Deferred interest annuity B. Immediate annuity C. Variable annuity D. Flexible payment annuity

B. Immediate annuity

The main difference between immediate and deferred annuities is A. The number of insureds B. The amount of each payment C. When the income payments begin D. How the annuity is purchased

C. When the income payments begin

Which of the following is TRUE regarding the annuity period? A. During this period of time the annuity payments grow interest tax deferred B. It is also referred to as the accumulation period C. It is the period of time during which the annuitant makes premium payments into the annuity D. It may last for the lifetime of the annuitant

D. It may last for the lifetime of the annuitant

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase? A. Payments for 20 years B. Payments for life C. Nothing D. Payments for 15 years

D. Payments for 15 years

Which of the following is NOT true regarding the annuitant? A. The annuitant's life expectancy is taken into consideration for the annuity B. The annuitant receives the annuity benefits C. The annuitant must be a natural person D. The annuitant cannot be the same person as the annuity owner

D. The annuitant cannot be the same person as the annuity owner

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE? A. The premium value will be paid to the annuitant's estate B. All benefits will be forfeited C. The cash value will be paid to the state government D. The cash value will be paid to the annuitant's estate

D. The cash value will be paid to the annuitant's estate

All of the following statements about equity index annuities are correct EXCEPT A. They invest on a more aggressive basis aiming for higher returns B. The annuitant receives a fixed amount of return C. They have a guaranteed minimum interest rate D. The interest rate is tied to an index such as the Standard and Poor's 500

B. The annuitant receives a fixed amount of return

A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose? A. Joint and Survivor B. Joint life C. Life with period certain D. Straight life

A. Joint and Survivor

When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is the money placed? A. Forwarded to an investor B. Each contract's separate account C. The annuity owner's account D. The insurance company's general account

D. The insured company's general account

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A. Liquidation period B. Depreciation period C. Annuitization period D. Pay-out period

B. Depreciation period

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payment for a minimum number of years is called A. Joint life annuity B. Life income with period certain C. Life income with refund D. Joint and survivorship

B. Life income with period certain

Which of the following is NOT true about a joint and survivor annuity benefit option? A. The surviving annuitant may receive reduced payments B. Payments stop after the first death among the annuitants C. A period certain option may be included D. This option guarantees income for two or more recipients

B. Payments stop after the first death among the annuitants

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

B. It is a period during which the payments into the annuity grow tax deferred

Which of the following is another term for the accumulation period of an annuity? A. Premium period B. Liquidation period C. Annuity period D. Pay-in period

D. Pay-in period

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. Installment refund B. Cash refund C. Installments for a fixed period D. Installments for a fixed amount

C. Installments for a fixed period

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity? A. Investment performance of the insured B. Statewide predetermined annual interest rate C. Insurer's guaranteed minimum rate of interest D. Investment performance of the company

C. Insurer's guaranteed minimum rate of interest

Under a pure life annuity, an income is payable by the company A. For as long as either the annuitant or a named beneficiary is alive B. Only for the life of the annuitant C. Until the principal and interest are exhausted D. For a guaranteed period of time, whether or not the annuitant survives to the end of that period

B. Only for the life of the annuitant

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

B. Pure life

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 contract can be issued without an annuitant B. The annuitant must be a natural person C. A corporation can be an annuitant as long as it is also the owner D. A corporation can be annuitant as long as the beneficiary is a natural person

B. The annuitant must be a natural person

Which of the following best describes what the annuity period is? A. The period of time from the effective date of the contract to the date of its termination B. The period of time during which accumulated money is converted into income payments C. The period of time from the accumulation period to the annuitization period D. The period of time during which money is accumulated in an annuity

B. The period of time during which accumulated money is converted into income payments

If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to A. Name another annuitant B. Live at least to his life expectancy C. Die before his life expectancy D. Name a beneficiary

B. Live at least to his life expectancy

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following? A. No payments B. Annuity dividends C. Full premium refund without any charges D. Guaranteed surrender value

D. Guaranteed surrender value

Why is an equity indexed annuity considered to be a fixed annuity? A. It has modest investment potential B. It has a fixed rate of return C. It is not tied to an index like the s&p 500 D. It has a guaranteed minimum interest rate

D. It has a guaranteed minimum interest rate

Equity Indexed annuities A. Are more risky than variable annuities B. Are securities instruments C. Invest conservatively D. Seek higher returns

D. Seek higher returns

What happens if a deferred annuity is surrendered before the annuitization period? A. The owner will only receive a refund of premium B. The insurer can only apply the surrender value toward another annuity C. Deferred annuities cannot be surrendered prior to the annuitization period D. The owner will receive the surrender value of the annuity

D. The owner will receive the surrender value of the annuity

All of the following statements are true regarding installments for a fixed period amount EXCEPT A. Value of the account and future earnings will determine the time period for the benefits B. This option pays a specific amount until the funds are exhausted C. The annuitant may select how big the payments will be D. The payments will stop when the annuitant dies

D. The payments will stop when the annuitant dies