Life Insurance chapter 6
What license or licenses are required to sell variable annuities?
Both a life insurance license and a securities license
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined?
It is a percentage of the cash value and decreases over time
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
Joint life
Your client uses $50,000 in inheritance money to purchase a single premium immediate annuity. How soon can he begin receiving income payments?
No later than 1 year from the time of purchase
Which of the following best describes a pure life annuity settlement option?
Pure life provides payments for as long as the annuitant is alive
Annuities can be used to fund which of the following?
Retirement plans
Who bears all of the investment risk in a fixed annuity?
The insurance company
When a fixed annuity owner pays a monthly annuity premium to the insurance company, where is this money placed?
The insurance company's general account
Which of the following is true regarding a market value adjusted annuity?
The owner is guaranteed a fixed interest rate for a specific period of time
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT
It is a life contingency option
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant
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 can surrender a deferred annuity contract?
Only the annuity owner
All of the following are true of an annuity owner EXCEPT
The owner must be the party to receive benefits
An agent selling variable annuities must be registered with
FINRA
What happens if a deferred annuity is surrendered before the annuitization period?
The owner will receive the surrender value of the annuity
Annuities differ from life insurance in all of the following ways EXCEPT
They are purchased with premiums
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?
Joint and Survivor
All of the following statements are true regarding installments for a fixed amount EXCEPT
The payments will stop when the annuitant dies
According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following
Guaranteed surrender value
The main difference between immediate and deferred annuities is
When the income payments begin
Which of the following products will protect an individual from outliving his or her money?
Annuity
Which of the following products provides income for a specified period of years or for life and protects a person against outliving his or her money
An annuity
which of the following is NOT true about a joint and survivor annuity benefit option?
Payments stop after the first death among the annuitants
What types of annuity can be purchased with a single premium and provides benefit payments immediately?
Immediate
When an annuity is written, whose life expectancy is taken into account?
Annuitant
Fixed annuities provide all of the following EXCEPT
Hedge against inflation
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Immediate
Jack and Jill are twins. When their grandfather died, he left each of them $100,000, which they each used to purchase an annuity. when they retire, since each select the life income option, which will receive the larger monthly annuity payment?
Jack's payment will be larger
An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?
Payments for 15 years
Which of the following is NOT true regarding Equity Indexed Annuities?
They earn lower interest rates than fixed annuities
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?
The annuitant will receive the higher of either the guaranteed minimum rate or current rate
After three years of making payments into a flexible premium deferred annuity, the owner decides to surrender the annuity. The insurer returns all the premium payments to the owner, except for a predetermined percentage. What is this percentage called?
Surrender charge
Which of the following is TRUE regarding variable annuities?
The annuitant assumed the risks on investment
Which of the following is NOT true regarding the annuitant?
The annuitant can't be the same person as the annuity owner
The president of a company is starting an annuity and decides that his corporation will be annuitant. Which of the following statements is true?
The annuitant must be a natural person
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
The beneficiary
Which of the following will NOT be an appropriate use of a deferred annuity?
Creating an estate
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?
Depreciation period
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
Which of the following is a feature of a single premium immediate annuity?
Income payments start within one year
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to
Live at least to his expectancy
Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and how 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
The minimum interest rate on an equity indexed annuity is often based on
An index like Standard & Poor's 500
Which of the following is a short-term annuity that limits the amounts paid to a certain fixed period or until a certain sized amount is liquidated?
Annuity certain
A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?
Immediate annuity
Which of the following is NOT true regarding the Life with Guaranteed Minimum annuity settlement option?
It does not guarantee that the entire principal amount will be paid out
Which of the following is another term for the accumulation period of an annuity?
Pay-in period
The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?
The annuitant must be a natural person
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 fundable by annuities?
Death benefits
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
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
The annuity owner dies during the accumulation period without naming a beneficiary. Annuity's cash value exceeds premiums paid. Which of the following is TRUE?
The cash value will be paid to the annuitant's estate
Which of the following best describes what the annuity period is?
The period of time during which accumulated money is converted into income payments
