Ch 8
Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this? A. Fixed life annuity with period certain B. Variable life annuity with installment refund C. Fixed life annuity with cash refund D. Variable life annuity with period certain
A. Fixed life annuity with period certain
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct? A. If the interest rate fails below a specific level, the surrender charge is waived B. If the interest rate rises above a certain level, the surrender charge is waived C. It allows the Life and Heath Guaranty Association to bailout the insolvent insurer D. A reinsurer will make the remainder of the annuity payments if the original insurance company becomes insolvent
A. If the interest rate fails below a specific level, the surrender charge is waived
When a deferred annuity is surrendered, who must sign the authorization to do so? A Owner B. Annuitant and beneficiary C. Annuitant D. All parties involved
A. Owner
Who typically makes the purchase payments in an individual annuity? A. Owner B. Trustee C. Insurer D. Beneficiary
A. Owner
The annuitant in a single premium deferred annuity (SPDA) A. Receives immediate benefit payments B. Makes only one premium payment C. Can make tax free withdrawals until the principal is recovered D. Is also the beneficiary
B. . Makes only one premium payment
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up? A. Increases B. Decreases C. Not affected by inflation D. Tied to stock index
B. Decreases
A large corporation purchases an accumulation annuity contract where all of the participating employees receive certificates of participation. What is this contract called? A. 403b plan B. Group deferred annuity C. Group immediate annuity D. Joint and survivor group plan
B. Group deferred annuity
John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract? A. John B. Mary C. Tom D. Marys estate
B. Mary
When compared to a fixed annuity, a variable annuity has what distinguishing feature? A. Flexible premiums according to a stock index B.. Investment risk is assumed by the purchaser C. Investment risk if assumed by the insurer D. Payout option can be changed after the accumulation phase
B.. Investment risk is assumed by the purchaser
The main purpose of an annuity is to A. Provide a tax shelter B. Create an estate C. Create a stream of income D. Provide a death benefit
C. Create a stream of income
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)? A. Taxed as a capital gain during the accumulation period B. Taxed as ordinary income during the accumulation period C. Taxed as ordinary income in the year received D. Received tax free to all recipients
C. Taxed as ordinary income in the year received
An annuity which starts paying monthly benefits within a month after issuance is called a(n) A. Period certain annuity B. Deferred annuity C. Fixed annuity D, Immediate annuity
D, Immediate annuity
When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest minus A. Bailout option charge B. Surrender charges C. Taxes owed D. Expenses and withdrawals
D. Expenses and withdrawals
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? A. Fixed annuity B. Survivorship annuity C. Joint life annuity D. Joint and survivor annuity
D. Joint and survivor annuity
Which benefit can be found in an equity indexed annuity, but not in a fixed annuity? A, Protection against living too long B. Equity loans C. A fixed rate of return D. Protection against long-term inflation
D. Protection against long-term inflation