Annuities

What type of license is required in order to sell variable annuities?

A life insurance license and a securities license

What are the two phases of an annuity?

Accumulation and Annuitization (Pay-in and Pay-out)

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

Amount of premium

Who receives income payments from an annuity?

Annuitant

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

Annuitant

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

Annuitization period

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 them with a certain amount of income for the rest of their life. However, this is not a life insurance policy. What type of contract does this person have?

Annuity

Who possesses all the rights in an annuity?

Annuity owner

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

Beneficiary

What are two types of refund life annuities?

Cash refund and installment refund

Which of the following will not be an appropriate use of a deferred annuity?

Creating an estate

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

Equity indexed annuity

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

Estate

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 a 15-year period certain pay?

For the life of the annuitant unless they die within the first 15 years of annuitization period, then they pay for the rest of the 15 years.

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

Immediate and deferred

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

Why is an equity indexed annuity considered to be a fixed annuity?

It has a guaranteed minimum interest rate

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

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

Which of the following is true regarding the annuity period?

It may last for the lifetime of the annuitant

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

How soon can income payments begin in an immediate annuity?

No later than 1 year from the time of purchase

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

No sooner than 1 year after 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)

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

Payments stop after the first death among the annuitants

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?

Pure life

How are annuities classified depending on how many lives they cover?

Single life and multiple life annuities

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

After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?

Surrender charge

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

The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefit 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 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

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

If 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

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 pure life annuity, an income is payable by the company

only for the life of the annuitant

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