Chapter 8- Annuities

An immediate annuity has been purchased with a single premium . When does the annuitant typically begin receiving benefit payments ? A.)1 month B.)6 months C.)12 months D.)24 months

A.)1 month

When does an immediate annuity begin making payments ? A.)After multiple premiums have been paid B.)After the first premium has been paid C.)After policy has been active for one year D.)After the incontestable period

B.)After the first premium has been paid

Which of the following is an annuity that is linked to a market - related index ? A.)Market - related annuity B.)Equity - indexed annuity C.)Deferred - risk annuity D.)Fixed - amount annuity

B.)Equity - indexed annuity

Which of these annuities require premium payments that vary from year to year ? A.)Flexible premium immediate annuity B.)Flexible premium deferred annuity C.)Fixed premium deferred annuity D.)Fixed premium immediate annuity

B.)Flexible premium deferred annuity

Phil is shopping for an annuity that guarantees he CANNOT outlive the benefits . Which of these benefit options would he choose ? A.)Accelerated lifetime benefit B.)Guaranteed lifetime withdrawal benefit C.)Right of income rider D.)Guaranteed minimum accumulation benefit

B.)Guaranteed lifetime withdrawal benefit

How do interest earnings accumulate in a deferred annuity ? A.)On a tax credit basis B.)On a tax - deferred basis . C.)On a tax - free basis D.)On a taxable basis

B.)On a tax - deferred basis .

An annuitant dies during the distribution period What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made ? A.)Variable annuity B.)Refund annuity C.)Rebate annuity D.)Return annuity

B.)Refund annuity

Which market index is normally associated with an indexed annuity's rate of return ? A.)NAIC B.)SEC C.)S & P 500 D.)A & P 300

C).S & P 500

Which of these is NOT considered to be a purpose of an annuity ? A.)Annuities are intended to create an estate B.)Annuities are intended to liquidate an estate C.)Annuities are intended for the tax - free growth of principal D.)Annuities are intended to distribute accumulated principal

A.)Annuities are intended to create an estate estate

Which of the following is considered to be the period when the accumulated value in an annuity is paid out ? A.)Annuitization phase B.)Accumulation phase C.)Principal phase D.)Period certain phase

A.)Annuitization phase

The taxable portion of each annuity payment is calculated using which method ? A.)Exclusion Ratio B.)Taxable Ratio C.)Cost Basis D.)Tax Basis

A.)Exclusion Ratio

What happens to interest earned if the annuitant dies before the payout start date ? A.)It is taxable B.)It is taxable only if no beneficiary is named C.)It is not taxable D.)It is only taxable if contract has been in force under one year

A.)It is taxable

Which type of annuity stops all payments upon the death of the annuitant ? A.)Life annuity B.)Period certain annuity C.)Cash refund annuity D.)Joint and survivor annuity

A.)Life annuity

Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies ? A.)Life only B.)Life with period certain C.)Cash refund D.)Installment refund

A.)Life only

Which annuity payout option allows the policyowner to choose a pre - determined number of benefit payments ? A.)Period certain B.)Straight life C.)Installment refund D.)Amount certain

A.)Period certain

An annuity is primarily used to provide A.)retirement income B.)disability income C.)long - term care benefits D.)death benefits

A.)retirement income

Kathy's annuity is currently experiencing tax - deferred growth until she retires . Which phase is this annuity in ? A.)Payout period B.)Accumulation period C.)Deferred period D.)Growth period

B.)Accumulation period

Lisa has recently bought a fixed annuity . Which of these is considered to be a disadvantage of owning this type of annuity ? A.)Payments cease 5 years after the annuitant's death B.)During periods of inflation , annuitants will experience an increase in purchasing power of their payments C.) During periods of inflation , annuitants will experience a decrease in purchasing power of their payments D.)Payment amounts can be unpredictable from month to month

C.)During periods of inflation , annuitants will experience a decrease in purchasing power of their payments

Which of these will have the highest monthly payout upon annuitization ? A.)Life with period certain B.) Joint and survivor life C.)Straight life D.)Joint life

C.)Straight life

Who assumes the investment risk with a fixed annuity contract ? A.)The owner B.)The annuitant C.)The insurer D.)The beneficiary

C.)The insurer

Fixed period settlement options are considered to be a form of a ( n ) A.)cash value loan B.)Variable life policy C.)annuity D.)endowment

C.)annuity

How soon can the benefit payments begin with a deferred annuity ? A.)Anytime after date of purchase B.)Anytime within 12 months after date of purchase C.)A minimum of 6 months after date of purchase D.)A minimum of 12 months after date of purchase

D.)A minimum of 12 months after date of purchase

What is the nonforfeiture value of an annuity before annuitization ? A.)All premiums paid B.)All premiums paid plus interest C.) All premiums paid minus any withdrawals and surrender charges D.)All premiums paid , plus interest , minus any withdrawals and surrender charges

D.)All premiums paid , plus interest , minus any withdrawals and surrender charges

An annuitant is guaranteed to NOT outlive their benefits with a ( n ) A.)Survivorship clause B.)Guaranteed lifetime withdrawal benefit C.)Period certain provision D.)Guaranteed minimum accumulation benefit

D.)Guaranteed lifetime withdrawal benefit

Which settlement option pays a stated amount to an annuitant , but no residual value to a beneficiary ? A.)Fixed period B.)Interest only C.)Installment refund D.)Life income

D.)Life income

During the accumulation period , who can surrender an annuity ? A.)Payor B.)Annuitant C.)Beneficiary D.)Policyowner

D.)Policyowner

Kristi purchases an annuity that will pay her husband an income for 15 years . If he dies , this income will become payable to their children for the remainder of the period . Kristi has what kind of annuity ? A.)Joint life with period certain B.)Life annuity with survivorship C.)Survivorship annuity D.)Temporary annuity certain

D.)Temporary annuity certain

Maria would like an annuity that provides a guaranteed accumulation or payout . The type of annuity she is seeking is called A.)variable payout B.)fixed accumulation C.)interest guaranteed D.)annuity certain

D.)annuity certain

Under a non - qualified annuity , interest is taxed after the A.)deposits have been made B.)death of the annuitant C.)distribution of payments D.)exclusion ratio has been calculated

D.)exclusion ratio has been calculated

Simon has purchased a fixed immediate annuity . His payment amount will be dependent upon principal , interest , and the contract's A.)surrender charge B.)death benefit C.)cash refund D.)income period

D.)income period

If the annuitant dies before the annuity start date , A.)the benefits will be given tax - free only to a stated beneficiary B.)nothing is given to the beneficiary C.)the premiums paid will be given to the beneficiary D.)the premiums paid plus interest earned will be given to the beneficiary

D.)the premiums paid plus interest earned will be given to the beneficiary