Chapter 5: annuities

Which of the following can surrender a deferred annuity contract

Only the annuity owner

Annuities can be used to fund which of the following?

Retirement plans

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

Insurer's guaranteed minimum rate of interest

Equity Indexed Annuities

Seek higher returns

Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain fixed amount is liquidated?

Annuity certain

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after one year since the annuity was purchased. what type of annuity is it?

Deferred

A man purchase a 90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?

Immediate

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

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is TRUE?

The beneficiary will receive the greater of the money paid into the annuity or the cash value.

Which of the following is NOT true about a joint and survivor annuity benefit option?

Payments stop after the first death among the annuitants.

Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits

$50,000

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 will not be an appropriate use of a deferred annuity

creating an estate

Which of the following is not true regarding the life with guaranteed minimum annuity settlement option?

It does not guarantee that the entire principle amount will be paid out

Which of the following best describes a pure life annuity settlement option?

pure life provides payment for as long as the annuitant is alive

Which of the following is true regarding the accumulation period of an annuity?

It is a period during which the payments into the annuity grow tax deferred.

The term "fixed" in a fixed annuity refers to all of the following EXCEPT

death benefit

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?

deferred

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

Depreciation period

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

Insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum I test is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?

2.5%

Your client is planning to retire. She has accumulated $100,000 in 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

What happens if a deferred annuity is surrendered before the annuitization period?

The owner will receive the surrender value of the annuity

Which of the following is true regarding variable annuities

The annuitant assumes the risks on investment

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

The beneficiary

Fixed annuities provide all of the following EXCEPT

hedge against inflation

Underlying assets for variable annuity contracts must be maintained in what type of account?

Separate account

Under a straight life annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive

Nothing; the payments will cease.