Chp 2 part E Annuities: A Guide to Understanding

How many classifications of annuities are there ?

4

Flexible premium deferred annuity

An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity

A universal life is best described as ?

Annually Renewable Term policy with a cash value account.

A universal life insurance policy is best described as a

Annually renewable Term policy with a cash value account.

Single Life

Annuity payments made based on one life

Multiple Life

Annuity payments made based on two or more lives

Outlive

Annuity protects against running out of money

Types of Annuities

Based on premium payment, income start, investment, and payout

Fixed Period

Benefits paid for specified time, regardless of annuitant's life

Fixed Amount

Benefits paid until funds exhausted, regardless of annuitant's life

Annuity

Contract providing income for a specified period or life

the annuitant dies before the annuitization period starts, what will the beneficiary receive?

Either the amount paid into the annuity or the cash value, whichever is greater

What type of annuity credits its interest based upon an index such as S&P 500?

Equity indexed annuity

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

Indexed Annuity

Fixed annuity with higher returns tied to an index

Joint and Survivor

Guaranteed income for two recipients, reduced after first death

Installment Refund

Guaranteed installments until entire principal is paid out

Fixed Annuity

Guaranteed interest rate, fixed income payments

Shorter Life Expectancy

Higher annuity benefit

Annuity Income Amount

Income based on premium, payment frequency, interest rate, age, and gender

Deferred Annuity

Income payments start after one year of purchase

Immediate Annuity

Income payments start within one year of purchase

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 amount

Variable Annuity

Invested in separate account, variable returns

Why is an index annuity considered to be fixed?

It has a fixed rate of return.

Variable whole life insurance is based on what type of premium?

Level fixed premium investment product

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Level term

Mortality tables are used by insurance companies to predict what?

Life expectancy and the death rates for specific groups of individuals

Cash Refund

Lump-sum refund of principal minus benefit payments

Single Premium

One-time lump-sum payment for annuity

What universal life option has a gradually increasing cash value and a level death benefit?

Option A

Pure Life

Payments cease at annuitant's death, highest monthly benefits

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

Life with Period Certain

Payments guaranteed for annuitant's lifetime and specified period

Joint Life

Payments until first death among annuitants

Beneficiary

Person receiving annuity assets upon annuitant's death

Annuitant

Person receiving annuity payments based on life expectancy

Periodic Payments

Premiums paid in installments over time

Life with Guaranteed Minimum

Principal refunded to beneficiary if annuitant dies before payout

Owner

Purchaser of annuity contract with rights and benefits

Life Contingency Options

Pure life vs. life with guaranteed minimum

Annuities Certain

Short-term annuities with fixed period or amount

Mortality Tables

Tables indicating life expectancy for annuity calculations

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

They earn lower interest rates than fixed annuities.

Annuitization Period

Time when accumulated sum is converted into income payments

Accumulation Period

Time when payments are made into annuity and earn interest

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?

Universal life

Term

What type of life insurance policy offers pure death protection

Joint Life Annuity

an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that

Joint and Survivor Annuity

arrangement is a modification of the life income option in that it guarantees an income for two recipients that neither can outlive.

What are the three characteristics of a fixed annuity ?

guaranteed minimum interest rate, payments do not vary, payments guaranteed for specific $ amount

A return of premium term policy is written as what type of term coverage ?

increasing

an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

joint life

long life expectancy

lower benefit

what are the four classifications of annuities?

payment, beginning, investments, deposing

what are the three characteristics of a variable annuity

separate account, no guarantee interest rate, SEC license