ch 7 insurance practice quiz Annuities

How does an indexed annuity differ from a fixed annuity?

An indexed annuity differs from a fixed annuity in that indexed annuity owners receive credited interest tied to the fluctuations of the linked index.

P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?

deferred

N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?

Fixed Deferred

What is an element of a Single Premium annuity?

Lump-sum payment

What type of annuity has a cash value that is based upon the performance of it's underlying investment funds?

Variable

Which type of contract liquidates an estate through recurrent payments?

annuity

The type of annuity that can be purchased with one monetary deposit is called a(n)

immediate annuity.

An immediate annuity consists of a

single premium

the annuity that represents the largest possible monthly payment to an individual annuitant is

straight life annuity

which of these is an element of a single premium annuity

lump-sum payment

which of these statements concerning an individual straight life annuity is accurate

payments are made to an annuitant for for life

T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this?

Life Annuity with Period Certain

S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?

Single Premium. Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.

What is considered to be a characteristic of an immediate annuity?

"Benefit payments start within one payment period of purchase". An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase.

An individual who purchases a Life annuity is given protection against

"the risk of living longer than expected". A Life annuity offers protection against the risk of living longer than anticipated.

W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)

immediate annuity