Annuities

Which of these situations initiates benefit payments in a deferred annuity? When the owner dies When the contract's cash value exceeds the cost basis When the contract is annuitized Cash surrender of the annuity

When the contract is annuitized

A retired couple would like to maximize the income derived from their life savings and have it payable until they both die. Which annuity would be their best choice? Fixed Survivorship Joint life Joint and survivor

Joint and survivor

Which of the following normally pertains to an immediate annuity? Tax-free benefit payments Installment premium payments No accumulation period Lump-sum benefit

No accumulation period

Which benefit can be found in an equity indexed annuity, but not found in a fixed annuity? Protection of principal Equity loans A fixed minimum rate of return Protection against long-term inflation

Protection against long-term inflation

When does the owner's contractual rights begin under an individual annuity contract? Time of purchase When the benefit period begins When the accumulation period ends After free-look period expires

Time of purchase

Which statement is INCORRECT concerning a tax-sheltered annuity (TSA)? Participants make payments from salary reductions Normally used by charitable, educational, and religious organizations Also known as 403(b) plans Annual investment gains are included in participant's gross income

Annual investment gains are included in participant's gross income

Which of the following features a guaranteed interest rate, flexible deposits, deferred taxation, and death benefits equal to the cash value? Variable life policy Modified life policy Flexible premium fixed annuity Immediate fixed annuity

Flexible premium fixed annuity

What happens to the cash value of a market value adjusted annuity if it's surrendered early? Market value adjustment is applied Subject to no adjustments Subject to a surrender charge only Cash value is forfeited

Market value adjustment is applied

A life annuity with period certain is characterized as guaranteeing benefit payments for a stated period of time after reaching age 65 guaranteeing a minimum interest rate guaranteeing lifetime benefit payments for two or more people guaranteeing benefit payments for a stated minimum number of years

guaranteeing benefit payments for a stated minimum number of years

An annuity which starts paying benefits within a month after issuance is called a(n) period certain annuity deferred annuity fixed annuity immediate annuity

immediate annuity

When compared to a fixed annuity, a variable annuity has what distinguishing feature? Flexible premiums according to a stock index Investment risk is assumed by the policyowner Investment risk is assumed by the insurer Payout option can be changed after the accumulation phase

Investment risk is assumed by the policyowner

The contract owner in a single premium deferred annuity (SPDA) receives immediate benefit payments makes only one premium payment can make tax-free withdrawals until the principal is recovered is also the beneficiary

makes only one premium payment

The contractual rights that allow the owner of a deferred annuity to surrender the cash value are called nonforfeiture options settlement options conversion options surrender options

nonforfeiture options

An annuity owner has a life annuity which provides benefit payments for a minimum number of years, regardless of when the annuitant dies. The contract feature of this annuity is called fixed period period certain installment refund straight life

period certain

An owner's cost basis for a deferred annuity is typically the same as the annuity's cash value total premiums paid benefits payable to the annuitant interest earned within the annuity

total premiums paid

Which statement concerning a deferred annuity is correct? The contract cannot be assignable by the owner Requires a single premium payment The owner can be the beneficiary, annuitant, or neither Benefits start immediately after contract formation

The owner can be the beneficiary, annuitant, or neither

What determines the amount an annuitant is paid for a variable annuity? Varies according to how many outstanding annuity units Remains fixed during the payout phase Varies according to the market value of the underlying securities Varies according to the insurer's investments in its general account

Varies according to the market value of the underlying securities

How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)? Taxed as a capital gain during the accumulation period Taxed as ordinary income during the accumulation period Taxed as ordinary income in the year received Received tax-free to all recipients

Taxed as ordinary income in the year received

The death of an annuity contract owner will generally trigger a payout to the beneficiary. How may the spouse as beneficiary of the annuity owner avoid the income tax burden? The income tax burden does not affect a spouse as beneficiary The spouse as beneficiary may continue the contract with deferred taxation as contingent owner The spouse as beneficiary may receive a nontaxable death benefit from the annuity contract The spouse as beneficiary may receive a lump-sum payout with deferred taxation

The spouse as beneficiary may continue the contract with deferred taxation as contingent owner

Under which circumstance is the interest rate guaranteed within a market value adjusted annuity? When the contract has been in force for the period specified in the policy For the entire length of the contract Never When the cash value has reached a stated minimum amount

When the contract has been in force for the period specified in the policy

When dealing with single-life annuities, there is only one annuitant benefit payment premium payment beneficiary

annuitant

During an annuity's liquidation phase, the annuitant normally receives nothing receives benefit payments at regular intervals can borrow against the cash value receives a lump sum

receives benefit payments at regular intervals

How do benefit payments fluctuate over time in a variable life annuity? Benefit payments stay fixed Depends on market value changes in the separate investment account Annuitant controls any benefit payment changes Any benefit payment fluctuations have to be approved in writing by the owner

Depends on market value changes in the separate investment account

When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest, and then subtracting the bailout option charge surrender charges benefit payments expenses and withdrawals

expenses and withdrawals