Ch 5

A prospectus A prospectus is a disclosure document that provides the prospective buyer with information about all fees, charges, expenses, and risks. It must be provided by the producer prior to sale of the variable annuity.

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

Single Premium Deferred Annuity Regardless of how it is funded, by definition a deferred annuity does not begin its income stream for at least 13 months. Typically, the deferral period is many years, not just one.

A lump sum of money is placed into an account from which the annuitant will draw periodic benefits beginning more than a year from the date of purchase. This describes a:

Variable

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

An annuity

G is concerned about the future and living a comfortable retirement. Which of the products listed below is ideally suited to help G prepare for his retirement goal?

Zero A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected.

Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses the Life Income with Refund Payment Option when he annuitizes the policy. After receiving $1,000 each month for 80 months, Harry suddenly dies. How much will his beneficiary, his wife Lucille, receive?

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

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

Life Income Joint and Survivor

Mr. & Mrs. Smith received monthly benefits from their annuity, and upon Mr. Smith's death, Mrs. Smith receives a reduced amount. What annuity payment option did they choose?

Insurer

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

Owner The owner is the individual who controls the contract, is responsible for making payments into the contract, and has all of the contractual rights in the policy.

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

Joint Life

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?

Life Income Option The annuity Life Income Option (like the Life Income Settlement Option in life insurance) pays a benefit for as long as the annuitant lives, and upon death, all payments cease. It also provides the highest monthly income, all other factors being equal

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:

Variable

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

Determine the contract's interest credit

The owner of an annuity may do all of the following, except:

Annuity

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

59 1/2 A penalty of 10% is levied on withdrawals of tax-deferred earnings in order to discourage the use of annuities as short-term tax shelters.

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

Life Income with Period Certain

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

Variable In order to achieve the goal of wealth accumulation while offsetting the effects of inflation, most if not all of a Variable Annuity separate account investments are based off the stock market. None of the other annuities would lose value if the stock market 'crashed'.

Which of the following annuities would potentially be the most negatively impacted by the overall stock market falling in value?

Variable

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

All payments cease Because all payments cease upon the annuitant's death, the amounts of the monthly income payments under this option are larger than under any other option.

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

Flexible With a flexible premium, contributions may be made as often and in whatever amount the contract owner desires. However, most insurers do set a minimum and a maximum dollar amount they will accept.

X is 57 years old, and planning for their retirement. They do not know what their cash flow will look like over the next 10 years, but wants to fund an annuity to provide retirement income. Which of the following premium funding methods would be best for X to consider?