Cram Course: 7- Annuities
A 45 year old woman won $100k in a scratch off lottery ticket. She purchased an annuity that will pay her $1500 per month beginning at age 60. Which of these annuities did this woman purchase?
a deferred fixes annuity.
P is a forty year old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
an immediate annuity. -she DID buy: a straight life deferred annuity a straight life annuity and a deferred annuity
which type of contract liquidates an estate the recurrent payments?
annuity.
What is considered to be a characteristic of an immediate annuity?
benefit payments start within one payment period of purchase.
P, age 50, purchased an annuity that P will fund with $500/month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
deferred annuity.
A contract owner terminates an annuity before the income payment period begins. The owner will then receive.
the current contract surrender value at the time.
An individual who purchases a Life annuity is given protection against what?
the risk of living longer than excepted.
A Variable Annuity has which of the following characteristics?
underlying equity investments in separate account.
What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
variable annuity.
Which type of annuity pays benefits based on UNITS rather than dollar amount?
variable.
Which of the following is not included in an annuity contract?
AD&D rider.
All of the following statements regarding a Tax Sheltered Annuity (TSA) are true EXCEPT which one? (Which one is false?)
Income derived from the TSA is received income tax-free. -upon retirement, payments received by employees from the accumulated savings in tax-sheltered annuities are treated like ordinary income tax.
Which of the following are Equity Indexed annuities typically invested in?
S&P 500 -an _________ annuity is a type of tax deferred annuity whose credited interest is limited to an _____________annuity
K has inherited a large sum of money. K purchases an annuity with this sum on July 1. And starts receiving payments Aug 1. These payments will continue for as long as she and her spouse lives. Which type of annuity did K purchase?
Single Premium, Immediate, Joint with Survivor annuity.
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)?
Straight Life Annuity -the straight life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.
N, age 50, recently bought an annuity that will pay a guaranteed $2k/month at age 70 for life. What type of annuity did N purchase?
fixed deferred.
Which of these is an element of a Single Premium annuity?
lump sum payment
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son of the balance of the 20 years. What types of annuity is this?
Life Annuity with Period Certain.
The payments of Q's annuity are no less than $259 quarterly. Which of the following annuities does Q own?
flexible installment deferred.
The type of annuity that can be purchased with one monetary deposit is called?
immediate annuity.
W is a 39 year old woman who just purchased an annuity to provide income of life starting at age 60. All of these would be ACCEPTABLE EXCEPT which one?
immediate annuity.
T, age 70, withdraws cash from a profit-sharing plan and purchases a Straight Life annuity. What will this transaction provide?
income that can not be outlived by the owner.
How does an indexed annuity differ from a fixed annuity?
indexed annuity owners may receive credited interested tie to the fluctuations of the linked index.
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid, this is called what?
installment refund annuity. states that the beneficiary will continue receiving payments after the annuitant dies if the payments are equal to the contract value.
Variable annuities may invest premiums in each of the following, EXCEPT.
insurer's corporate business account.
Which of these statements concerning an individual Straight Life annuity is accurate?
payments are made to an annuitant for life.
An immediate annuity consists of a what?
single premium.
S received a $500k lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her a guaranteed income for life. What type of annuity is best suited for her situation?
single premium.
T purchased a $100k single premium Straight Life annuity 5 years ago. He has received monthly payments since inception of the annuity. If T dies, the insurance company.
the insurance company does NOT have to continue making payments after the annuitant dies.
What is the basic function of an annuity?
the systematic liquidation of accumulated funds.
