Annuities

What is an equity indexed annuity considered to be a fixes annuity?

It has a guaranteed minimum interest rate

Under what annuity option does the annuitant select the time period for the benefits and the insurer select how much each payment will be?

Installments for a fixed period

What best describes the the difference between pure life and life with guaranteed minimum settlement option?

Life with guaranteed minimum will pay the remaining principal to the beneficiary

If an annuitant selects straight life annuity settlement option, in order to receive all of the money, the owner needs to:

Live at least to his life expectancy

Your client plans to retire at 50 years old. He wants an annuity that will pay from retirement until social security and other pensions can be used. What settlement option is best?

Annuity Certain- the annuitant can select the time period or amount for benefit payments

What is a feature of a variable annuity?

Benefit payment amounts are not guaranteed

A man purchased a $90,000 annuity with single premium and received payments two months later. What type of annuity is this?

Immediate annuity

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

It has a guaranteed minimum interest rate

What is not true regarding installments for a fixed period annuity settlement option?

It is a life contingency option

What is true regarding the annuity period?

It may last for the lifetime of the annuitant (Accumulated money convert to income stream)

What is not true about life with guaranteed minimum annuity settlement option?

It provides a higher monthly benefit than a pure life annuity

What best describes a pure life annuity settlement option?

Pure life. It provides payments for as long as the annuitant is alive

What is NOT true regarding an annuitant?

The annuitant cannot be the same person as the annuity owner

The annuity owner dies during the accumulation period of the annuity. The cash value is more than the premiums he paid. There is no named beneficiary. What happens to the cash value?

The cash value is paid to the owner's estate

What is not true about equity indexed annuities?

They earn lower interest rates than fixed annuities

what is not true about a group annuity?

it can be owned by individual employees

What product requires a securities licence?

variable annuities

In a fixed annuity, what is true about the guaranteed interest rate on the investment?

The annuitant will receive the higher of either the guaranteed minimum or current rate

If the annuitant dies during the accumulation period, who gets the benefits?

The beneficiary

What is not true of an annuity owner?

The owner must be the party to receive the benefits

What is not true of installments for a fixed amount?

The payments stop at the annuitant's death

Your client's company does not offer company wide annuity contracts. What type of annuity contract works best?

Individual

All factors equal, which type of annuity will generally provide the highest monthly income?

Straight life

What is NOT true about equity index annuities?

The annuitant receives a fixed amount of return

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

The insurance company

What is not true regarding equity indexed annuities?

They earn lower interest rates than fixed annuities

What is true of equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate

That main difference between immediate and deferred annuities is:

when income payments begin

An agent selling variable annuities is required to register with:

FINRA

Who can surrender a deferred annuity contract?

Only the annuity owner

What is true regarding variable annuities?

The annuitant assumes the risk on investment

What is true about variable annuities?

The annuitant assumes the risks on investments

The president of a company is starting an annuity and decides the corporation will be the annuitant. What statement is true?

The annuitant must be a natural person

The term 'fixed' in a fixed annuity refers to all of the following except:

Death Benefit

Under what annuity option does the annuitant select the time period for the benefits and the insurer determines how much each payment will be?

Installments for a fixed period

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

Insurer's guaranteed minimum rate of interest

if a contract provides a set amount of income for 2 or more people with income stopping at the first death, it is called:

Joint life annuity

A prospective deferred annuity owner is concerned about what would happen if he surrenders the annuity before the annuitization period. The agent will explain:

Nonforfeiture option guarantees that the owner will receive the surrender value of the contract

Which two terms are associated with the way and annuity if funded?

Single & periodic payments

You 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. As her agent, you should recommend:

Straight life (payments cease at death, high monthly benefit for individuals)

After 3 years of making payments into a flexible premium deferred annuity, the owner surrenders the plan. The insurer returns all of the premium payments except a predetermined percentage. What is the percentage called?

Surrender Charge

If an annuitant dies during the accumulation period, who gets the benefits?

The Beneficiary

what is true about a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate for a specific period of time

What is not true regarding the accumulation period of an annuity?

it would not occur in a deferred annuity

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

only for the life of the annuitant

what is not true regarding installments for a fixed amount?

the payments will stop once the annuitant dies (no life contingencies)

What best describes what the best annuity period is?

the period of time during which accumulated money is converted to income payments

If a contract provides a set amount for 2+ people with income stopping at 1st death. What is this called?

Joint life annuity

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would the beneficiary receive if he dies 5 years after beginning the annuity phase?

Payments for 15 years

What is NOT true about joint and survivor annuity benefit option?

Payments stop after the first death among annuitants Payments actually stop after the 2nd death

If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?

The charge is a percentage of the cash value and decreases over time

When a fixed annuity owner pays his or her insurance company monthly annuity premiums, where does the money go?

The insurance company's general account

What is not true regarding an annuity certain?

Benefits stop at the annuitant's death

What license/licenses are required to sell variable annuities?

Both life insurance and a securities license

What will not be an appropriate use of a deferred annuity?

Creating an estate

An individual has been making periodic payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is this?

Deferred Annuity

What is the advantage of having a qualified annuity?

Favorable tax treatment

Under what installment option does the annuitant select the amount of money and the insurer selects the time period?

Fixed amount

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

Immediate annuity (bought with a single lump sum payment with a 25 year fixed period distribution)

The act that sets standards for advice given by a producer about annuities is known as:

The Nebraska Protection in annuity transaction act

What is not true regarding an annuitant?

The annuitant cannot be the same person as the annuity owner

Before he dies, an annuitant receives monthly payments of $12,500 from his $25,000 straight life annuity. He was also insured under a $50,000 paid up whole life policy. His wife is the beneficiary. Considering both contracts, how much will the wife receive in benefits?

$50,000- straight life annuity payments stop at death

What is NOT true about the life with guaranteed minimum annuity settlement option?

It provides a higher monthly benefit option than a pure life annuity

A couple near retirement is planning for their golden years. They want monthly annuity benefits for the rest of their lives. Should one of them die, the other still wants benefits. Which option should they choose?

Joint and Survivor

Life annuity that pays benefits through the lifetime of the annuitant and guarantees payment for a minimum number of years is called:

Life income with period certain

A deferred annuity is surrendered prior to annuitization. What best describes the non-forfeiture value of the annuity?

The surrender value is equal to 100% of premiums paid, minus withdrawal & surrender charges

In reference to fixed annuities, what comprises most of a life insurance company's general account?

Conservative investments like bonds

fixed annuities do not provide what?

Hedge against inflation

What form on the annuity settlement options provides payments to an annuitant for the rest of their life and ceases at their death?

Pure life