Annuities (Chapter 8)
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefits?
1 month
How soon can the benefit payments begin with a deferred annuity?
A minimum of 12 months after date of purchase
Kathy's annuity is currently experiencing tax-deferred growth until she retires. Which phase is this annuity in?
Accumulation Period
When does an immediate annuity begin making payments?
After the first premium has been paid
Fixed period settlement options are considered to be a form of a(n):
Annuity
An annuitant is guaranteed to NOT outlive their benefits with a(n):
Guaranteed Lifetime Withdrawal benefit
Which type of annuity stops all payments upon the death of the annuitant?
Life Annuity
What annuity payout option allows the policyowner to choose a pre-determined number of benefit payments?
Period Certain
An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
Refund Annuity
An annuity is primarily used to provide:
Retirement Income
What is TRUE about the annuitant?
The annuitant's life expectancy determines the annuity payments
Under a non-qualified annuity, interest is taxed after the:
exclusion ratio has been calculated
Fixed annuities do NOT provide:
hedge against inflation
Simon has purchased a fixed immediate annuity. his payment amount will be dependent upon principal, interest, and the contract's _________
income period
What is an annuity that is linked to a market-related index?
Equity-indexed annuity
The taxable portion of each annuity payment is calculated using which method?
Exclusion Ratio
What is NOT considered to be the purpose of an annuity?
Annuities are intended to create estate
Which of these annuities require premium payments that vary from year to year?
Flexible Premium Deferred Annuity
How are annuities given favorable tax treatment?
Gains are taxed at distribution
What happens to interest earned if the annuitant dies before the payout start date?
It is taxable
Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
Life Income
Which annuity payout option makes no additional payments regardless of when the annuitant dies?
Life Only
How do interest earnings accumulate in a deferred annuity?
On a tax-deferred basis
Andy, the annuitant, dies before the annuity start date. What happens now?
Premiums paid plus interest earned is returned to the beneficiary
Which market index is normally associated with an indexed annuity's rate of return?
S&P 500
What will have the highest monthly payout upon annuitization?
Straight Life
Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?
Temporary Annuity Certain
What will the beneficiary receive if an annuitant dies during the accumulation period?
The greater of the accumulated cash value or the total premium paid
Who assumes the investment risk with a fixed annuity contract?
The insurer
