Annuities
Jenny directed $2,500 of her premium deposit to an aggressive technology stock subaccount. At the time of her original deposit, the value of an accumulation unity in that subaccount was $25. Jenny bought 100 units. Two months later, the value of each of those units dropped to $15. What is Jenny's investment in the technology stock account now?
$1,500
When Gary bought an equity-indexed annuity (EIA) with a $10,000 premium deposit, the S&P 500 Index was at 1000. At the end of the contract's first term one year later, this index was at 1100. Based only on this information, what is the basis for the amount of interest credited to Gary's contract?
10%
Al is a 60-year-old male. His $100,000 fixed annuity can provide $5.50 per $1,000 of accumulated value under a straight life payout option. How much income can Al expect and for how long?
$550 a month for life *Fixed annuitized amounts do not change over the term of the annuitization period. Under a straight life payout option, Al's $100,000 annuity fund would generate $550 a month for as long as he lives.*
Ann is beneficiary of an annuity owned by Jim. If Jim annuitizes the contract at retirement and dies shortly afterward, what benefits will Ann receive from the annuity?
Ann's right to any funds will be based on the income payout option Jim selected.
Which of the following statements best describes the purposes that annuities serve?
Annuities accumulate and/ or distribute sums of money.
All of the following statements about annuities are generally correct, EXCEPT:
The historic purpose of annuities is to create estates over a certain period.
A deferred annuity would be a suitable recommendation for all the following needs EXCEPT:
Joe, age 23, wants to save money to buy a first home within 10 years.
What must an annuity owner do to withdraw funds from his or her annuity contract?
Notify the insurer of the request to withdraw funds.
Which of the following best typifies the use of a structured settlement annuity?
Shirley was paralyzed in a car accident, and a jury awarded her $2 million which must be paid to her over a 20 tear period.
What is the only restriction on naming an annuitant?
The annuitant must be a natural person.
Which statement regarding two-tiered interest rate annuities is NOT correct?
a two-tiered fixed annuity has a guaranteed higher level of interest crediting than most traditional fixed annuities.
When an annuity owner makes premium deposits and allocates them among the contract's subaccounts, what are these funds used to buy?
accumulation units
The purpose for a long-term care rider with a deferred annuity contact is to
allow withdrawals from the deferred annuity without a surrender charge if the annuitant is confined to a nursing home.
George us receiving income payments from an annuity. His wife, Ellen, will continue receiving income payments for the rest of her life from George's annuity when he dies. Under this annuity contract, what is Ellen considered?
an annuitant
What type of annuity option pays income over a set number of years or in specified amounts?
annuity certain income option
Which of the following is used to determine the amount of monthly income a fixed immediate annuity would provide per $1,000 of premium?
annuity purchase rate
Under which of the following are payments made for as long as it takes to liquidate the annuity principal, with the contract owner choosing a monthly amount, and the insurance company computing how long it will take to liquidate the principal at the selected amount?
fixed amount certain payout option.
Fran has an annuity into which she is making monthly fixed premium deposits of a specified amount and which she intends to use to supplement her income when she retires in 15 years. The annuity is credited with the higher of a current or guaranteed rate of interest. What type of policy does Fran most likely own?
fixed premium deferred annuity.
If an annuity requires only that each premium deposit be above a certain minimum, this is most likely which type of annuity?
flexible premium deferred annuity
Which of the following is NOT a common joint life settlement option?
joint and one-quarter survivor
Mark and Mary are preparing to annuitize their deferred annuity. They want a settlement option that will continue making payments for as long as either is alive, no matter which of them dies first. Which of the following settlement options best suits their need?
joint survivor life income
All of the following are accurate reasons for not using deferred annuities for short-term accumulation goals EXCEPT:
possible loss of accrued interest earnings upon distribution
Which of the following is NOT a party to an annuity?
the agent
What is the name of the period during which funds are paid out of an annuity contract in the form of periodic income payments?
the annuity payout period
All of the following statements about the interest rates on deferred annuities are correct EXCEPT:
the guaranteed minimum rate is usually 5-6%
What options does an insurer have when asked by an annuity owner for a full withdrawal of an annuity contract's accumulated value?
the insurer must comply with the request.
While equity-indexed annuities (EIAs) are fairly complex products, the basic concept is simple enough, and is best described as which one of the following?
the percent of change is the selected stock index over the contract's term determines the percentage interest rate credited to the funds in the EIA.
Which of the following statements best describes the purpose of the annuity payout period?
to distribute funds in the form of guaranteed periodic payments over a time period selected by the annuity owner, throughout the annuitant's lifetime and even afterward.