Annuities Questions

Which of the following will NOT be an appropriate use of a deferred annuity? A Creating an estate B Accumulating retirement funds C Accumulating funds in an IRA D Funding a child's college education

A Deferred annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children's college education. Unlike life insurance, annuities do not create an estate, but liquidate it.

Which of the following is NOT true regarding the accumulation period of an annuity? A It would not occur in a deferred annuity. B It is the period during which the annuity payments earn interest. C It is the period over which the owner makes payments into an annuity. D It is also known as the pay-in period.

A The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Which of the following is TRUE for both equity indexed annuities and fixed annuities? A They have a guaranteed minimum interest rate. B They are both tied to an equity index. C Both are considered to be more risky than variable annuities. D They invest on a conservative basis.

A While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.

The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? A The owner's estate will receive the money paid into the annuity. B The insurance company will retain the cash value and pay back the premiums to the owner's estate. C The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary. D The beneficiary will receive the greater of the money paid into the annuity or the cash value.

D If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value, whichever is greater.

Your 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 A Life income with period certain. B Installment refund. C Joint and survivor. D Straight life.

D With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant.

Which of the following is TRUE regarding variable annuities? A A person selling variable annuities is required to have only a life agent's license. B The annuitant assumes the risks on investment. C The funds are invested in the company's general account. D The company guarantees a minimum interest rate.

B The payments that the annuitant invests into the variable annuity are invested in the insurer's separate account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds". Therefore, the annuitant assumes the risk of the investment.

Which of the following is TRUE regarding the annuity period? A It may last for the lifetime of the annuitant. B During this period of time the annuity payments grow interest tax deferred. C It is also referred to as the accumulation period. D It is the period of time during which the annuitant makes premium payments into the annuity..

A The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected

Which of the following is TRUE regarding the accumulation period of an annuity? A It is also referred to as the annuity period. B It is a period of time during which the beneficiary receives income C It is limited to 10 years. D It is a period during which the payments into the annuity grow tax deferred.

D The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred.

Which of the following is NOT true regarding the accumulation period of an annuity? A It is the period during which the annuity payments earn interest. B It is the period over which the owner makes payments into an annuity. C It is also known as the pay-in period. D It would not occur in a deferred annuity.

D The "accumulation period" is the period of time over which the annuity owner makes payments (premiums) into an annuity. This is the period of time during which the payments earn interest and grow tax deferred (which would be the case in a deferred annuity).

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? A Variable period B Variable amount C Fixed period D Fixed amount

D Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies.

Twins brother and sister each purchased a retirement annuity. When they retired at the same time, each selected the life income option. Both have similar life styles and are in good health. Which of the following is true with respect to their monthly annuity payments? A The man's payments will be larger. B The woman's payments will be larger. C The payments will be based on their health at the time the payments begin. D Because they are the same age, they will receive the same payments.

A Annuities use mortality tables to determine the amount of money needed in retirement. Because the life expectancy of women is greater, the woman's payments in this particular example will be smaller since they need to last longer.

An individual has been making periodic premium 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 it? A Deferred B Fixed C Flexible premium D Immediate

A Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.