chapter 5

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 beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?

$50,000

In an annuity, the accumulated money is converted into a stream of income during which time period?

annuitization period

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(n)

equity indexed annuity

When an annuity is written, whose life expectancy is taken into account?

annuitant

Which of the following is NOT true regarding the accumulation period of an annuity?

it would not occur in a deferred annuity

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

joint life annuity

Which of the following types of annuities will generally provide the highest monthly income?

straight life

Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?

it does not guarantee that the entire principal amount will be paid out

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT

it is a life contingency option

Which of the following is TRUE regarding the accumulation period of an annuity?

it is a period during which the payments into annuity grow tax deferred

Which of the following is TRUE regarding the annuity period?

it may last for the lifetime of the annuitant

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

life income with period certain

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

live at least to his life expectancy

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

nothing; the payments will cease

Under a pure life annuity, an income is payable by the company

only for the life of the annuity

Which of the following is another term for the accumulation period of an annuity?

pay-in period

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

straight 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?

the annuitant must be a natural person

Which of the following is true regarding a market value adjusted annuity?

the owner is guaranteed a fixed interest rate for a specific period of time

All of the following are true of an annuity owner EXCEPT

the owner must be the party to receive benefits

Which of the following is NOT true regarding Equity Indexed Annuities?

they earn lower interest rates than fixed annuities

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

they have a guaranteed minimum interest rate

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

fixed amount

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

joint and survivor

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?

guaranteed surrenderer value

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?

immediate annuity

Annuities can be used to fund which of the following?

retirement plans

Which of the following is NOT true regarding the annuitant?

the annuitant cannot be the same person as the annuity owner

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

the beneficiary

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?

the cash value will be paid to the annuitant's estate

When a fixed annuity owner pays pays a monthly annuity premium to the insurance company, where is this money placed?

the insurance company's general account

What happens if a deferred annuity is surrendered before the annuitization period?

the owner will receive the surrender value of the annuity

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?

installments for a fixed period

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?

joint and survivor

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?

payments for 15 years

Which of the following is NOT true about a joint and survivor annuity benefit option?

payments stop after the first death among the annuities

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?

pure life

All of the following statements are true regarding installments for a fixed amount EXCEPT

the payments will stop when the annuity dies

The main difference between immediate and deferred annuities is

when the income payments begin

Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity?

insurers guarantee minimum rate of interests

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?

joint life

Which of the following best describes a pure life annuity settlement option?

pure life provides payments for as long as that annuitant is alive

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

depreciation period