Life Chapter 5

What are the 2 phases of an annuity

Accumulation and annuitization

Who possesses all the rights in an annuity?

Annuity owner

What are the two classifications of annuities according to the time when annuity payments begin?

Immediate and deffered

what type of annuity can be purchased with a single premium?

Immediate annuity

What is a disadvantage of owning a fixed annuity, as opposed to variable?

In times of inflation, the benefit of a fixed annuity will have decreased purchasing power

What type of license(s) is/are required in order to sell variable annuities?

A life insurance license and a securities license

In flexible premium payment annuities, the term "flexible" refers to what?

Amount of premium

Who receives income payments from an annuity?

Annuitant

If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

Annuitant's estate

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

Annuitization period

An individual has a contract that will provide him with a certain amount of income for the rest of his life. This is not, however, a life insurance policy. What type of contract does this person have?

Annuity

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

Benefciary

what are the two types of refund life annuities?

Cash refund and installment refund

If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?

Current

What type of annuity credits its interest based upon an index such as standard and poors 500?

Equity indexed annuity

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?

Life income with period certain

How soon can income payments begin in an immediate annuity?

No later than 1 year from the time of annuity purchase

With a single premium differed annuity, when will the annuity payments become available?

No sooner than 1 year after the annuity purchase

Can a business or a corporation be an annuitant?

No, an annuitant must always be a natural person

How long is income paid under a pure life annuity?

Only for the life of the annuitant

What are accumulation units in annuities

Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)

What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the annuitant's death?

Pure life

What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

Straight life

Regarding annuity payments, what is the difference between the annuitant and the beneficiary of the annuity?

The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death

What causes a variable annuity benefit to vary?

The annuity's underlying investments

Who bears the investment risk in a fixed annuity?

The insurer

What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

The number of payments that purchase the annuity

What is the main reason for purchasing an annuity?

To provide income that the annuitant cannot outlive

What type of annuity requires an agent to have a securities license?

Variable annuity

Whose life expectancy is taken into consideration in an annuity contract?

annuitant

If the annuitant dies before the annuitization period starts, what will be paid to the beneficiary?

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

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

flexible premium deferred annuity

How long will a life annuity with 15 year period certain pay?

for the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years

If 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 annuity