Life, Accident, Health Insurance Pennsylvania Part 2

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

Annuitant

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

Annuitization period

Which of the following is NOT a term for the period of time during which the annuitant or beneficiary receives income? A. Depreciation period B. Annuitization period C. Pay-out period D. Liquidation period

A. Depreciation period

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

What is the main purpose of the Seven-pay Test?

It determines if the insurance policy is an MEC.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT: A. Amount and length of payments B. Death benefit C. Guaranteed rate of interest D. Equal annuity payments

B. Death benefit

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT: A. The insurer determines the amount for each payment. B. It is a life contingency option. C. It will pay the beneficiary only for a designated period of time. D. The payments are not guaranteed for life.

B. It is a life contingency option.

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

Insurer's guaranteed minimum rate of interest

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

Which of the following is NOT true regarding a nonqualified retirement plan? A. It can discriminate in benefits and selecting participants. B. Earnings grow tax deferred. C. It needs IRS approval. D. Contributions are not currently tax deductible.

C. It needs IRS approval.

If the owner prematurely surrenders his deferred annuity before the annuitization period begins, what is most likely to occur?

The owner will receive the payments that have been paid into the annuity, plus any interest, minus a surrender charge.

Which of the following products requires a securities license? A. Equity Indexed annuity B. Deferred annuity C. Variable annuity D. Fixed annuity

C. Variable annuity

A lucky individual won the state lottery, so the state will be sending him a check for each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

Income tax on distributions and no penalty.

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

Only for the life of the annuitant

Who bears all of the investment risk in a fixed annuity?

The insurance company

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT: A. The insurer determines the amount for each payment. B. It is a life contingency option. C. It will pay the benefit only for a designated period of time. D. The payments are not guaranteed for life.

B. It is a life contingency option.

Which two terms are associated directly with the way an annuity is funded?

Single payment or periodic payments

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

If a contract provides a set amount of income for 2 or more persons with the income stopping upon the first death of the insured, it is called

Joint life annuity

If an annuitant dies before annuitization occurs, what will the beneficiary receive?

Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount.

What best describes what the annuity period is?

The period of time during which accumulated money is converted into income payments

All of the following are general requirements of a qualified plan EXCEPT A. The plan must be for the exclusive benefits of the employees and their beneficiaries B. The plan must be permanent, written and legally binding. C. The plan must provide an offset for social security benefits. D. The plan must be communicated to all employees.

C. The plan must provide an offset for social security benefits.

An agent selling variable annuities must be register with

FINRA

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. You should recommend

Straight life

Fixed annuities provide all of the following EXCEPT: A. Future income payments B. Hedge against inflation C. Equal monthly payments for life D. Minimum guaranteed rate of interest

B. Hedge against inflation

Which of the following is TRUE regarding the accumulation period of an annuity? A. It is limited to 10 years. B. It is a period during which the payments into the annuity grow tax deferred. C. It is also referred to as the annuity period. D. It is a period of time which the beneficiary receives income.

B. It is a period during which the payments into the annuity grow tax deferred.

Periodic payments of accumulated funds best describes

an annuity

Employer contributions made to a qualified plan are

Subject to vesting requirements

For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are

Tax deductible

Which of the following IS a feature of a variable annuity? A. Securities license not required B. Benefit payment amounts are not guaranteed C. Payments into annuity are kept in company's general account D. Interest rate is guaranteed

B. Benefit payment amounts are not guaranteed

Which of the following is TRUE for both equity indexed annuities and fixed annuities? A. They have a guaranteed minimum interest rate. B. They are both tied to an equity index. C. Both are considered to be more risky than variable annuities. D. They invest on a conservative basis.

A. They have a guaranteed minimum interest rate.

Which of the following is NOT true regarding the annuitant? A. The annuitant must be a natural person. B. The annuitant cannot be the same person as the annuity owner. C. The annuitant's life expectancy is taken into consideration for the annuity. D. The annuitant receives the annuity benefits.

B. The annuitant cannot be the same person as the annuity owner.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which is true? A. A corporation can be an annuitant as long as it is also the owner. B. A corporation can be an annuitant as long as the beneficiary is a natural person. C. The contract can be issued without an annuitant. D. The annuitant must be a natural person.

D. The annuitant must be a natural person.

Which of the following are true regarding taxation of dividends in participating policies? A. Dividends are taxable in some life insurance policies and nontaxable in others. B. Dividends are considered income for tax purposes. C. Dividends are not taxable. D. Dividends are taxable only after a certain amount is accumulated annually.

C. Dividends are not taxable.

The form of life annuity which pays benefits throughout the lifetime of the annuitant and also guarantees payments for a minimum number of years is called

Life income with period certain

What best describes the difference between Pure Life & Life with Guaranteed Minimum settlement options?

Life with Guaranteed Minimum will pay the remaining principal to the beneficiary.

Which is NOT true about a joint and survivor annuity benefit option? A. The surviving annuitant may receive reduced payments. B. Payments stop after the first death among the annuitants. C. A period certain option may be included. D. This option guarantees income for 2 or more recipients.

B. Payments stop after the first death among the annuitants.

Underlying assets for variable annuity contracts must be maintained in what type of account?

Separate account

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 regarding the Life with Guaranteed Minimum annuity settlement option? A. It provides a higher monthly benefit than a pure life annuity B. It is a life contingency option C. The beneficiary receives the remainder of the principal amount upon annuitant's death D. Payments can be made in installments as a single cash refund

A. It provides a higher monthly benefit than a pure life annuity.

All of the following statements are true regarding tax-qualified annuities EXCEPT: A. They must be approved by the IRS B. Withdrawals are taxed. C. Employer contributions are not tax deductible. D. Tax accumulation is deferred

C. Employer contributions are not tax deductible.

All of the following would be different between qualified and nonqualified retirement plans EXCEPT: A. Taxation of contributions B. IRS approval requirements C. Taxation on accumulation D. Taxation of withdrawals

C. Taxation on accumulation

Which of the following is NOT true regarding an annuity certain? A. It will pay until a fixed amount is liquidated. B. There are not life contingencies. C. It is a short-term annuity. D. Benefits stop at the annuitant's death.

D. Benefits stop at the annuitant's death.

In life insurance policies, cash value increases

grow tax deferred

If a retirement plan or annuity is "qualified," this means

it is approved by the IRS.

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it?

Deferred