Annuities

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?

Bail-out

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

Beneficiary

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

Insurer's guaranteed minimum rate of interest

Your client's employer does not offer a company-wide annuity contract. What type of annuity contract could your client obtain?

Individual

Equity indexed annuities

Seek higher returns

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policy holders?

3%

Which of the following statements regarding annuities is correct?

Annuities provide income that the annuitant cannot outlive

What would be considered a disadvantage of owning a fixed annuity?

Decrease in purchasing power of the benefit in times of inflation

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 period

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

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

Which of the following is another term for the accumulation period of an annuity?

Pay-in period

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person

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

Annuitization period

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT

It is a life contingency option

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 two or more persons with the income stopping upon the first death of the insured, it is called a

Joint life annuity

Which of the following is true regarding a waiver of a surrender charge on an annuity contract?

The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days

All of the following must be considered when a producer is making an annuity recommendation EXCEPT

The consumer's legal history

Your client owns a Market Value Adjusted Annuity. In order to pay for a series of large, unexpected medical bills, he decides to surrender his policy prematurely. Which of the following will determine the penalty that that annuity owner will have to pay?

Current interest rate at the time of surrender

All of the following statements are true regarding installments for a fixed amount EXCEPT

The payments will stop when the annuitant dies

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

Annuitant

The annuity owner dies during the accumulation period of his annuity. The cash value of his annuity exceeds the premiums he paid. There is no named beneficiary. Which of the following is true?

The cash value will be paid to the annuitant's estate

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is this money placed?

The insurance company's general account

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits

A deferred annuity is surrendered prior to annuitization. Which of the following best describes the nonforfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.

Which of the following is true for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate

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

Conservative investments like bonds

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Depreciation period

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

Ann is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 Index. She would likely purchase a(n)

Equity Indexed Annuity

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

It has a guaranteed minimum interest rate.

A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?

Joint and survivor

What characteristic must an annuity have if it is used to accumulate funds in an IRA?

Tax-qualified

Which of the following best describes a bail-out provision?

It allows the owner to surrender the annuity without a charge

Annuity contracts grow tax deferred. That means that

There is no current income taxation upon the growth of the annuity

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

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

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

They earn lower interest rates than fixed annuities

Which of the following best describes what the annuity period is?

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

The equity in an equity index annuity is linked to

An index like Standard & Poor's 500

Which of the following is NOT true regarding the accumulation period of an annuity?

It would not occur in a deferred annuity

Which of the following is NOT true about a group annuity?

It can be owned by individual employees

Which of the following is true regarding the annuity period?

It may last for the lifetime of the annuitant

A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

Joint life