Module 7 - Annuities
Which of the following annuities pays benefits based on units rather than specific dollar amounts? -A flexible annuity -A variable annuity -A deferred annuity -A single premium annuity
A variable annuity
Which of the following is NOT included in an annuity contact? -Nonforfeiture benefit -Free-look period -Beneficiary -AD&D rider
AD&D rider
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? -A straight life deferred annuity -A straight life annuity -An immediate annuity -A deferred annuity
An immediate annuity: it's designed to make the first benefit payment to the annuitant at one payment interval from the date 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? -Immediate -Retroactive -Deferred -Universal
Deferred
G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer: -Does not have to make any further payments -Must continue to make monthly payments to G's beneficiary for the rest of the beneficiary's life -Must pay G's beneficiary the difference between the amount paid to G and $50,000 in a lump sum -Must continue to make monthly payments to G's beneficiary until the difference between the amount paid to G and $50,000 is paid out
Does not have to make any further payments
N purchases an annuity by making payments in an amount of no less than $100 quarterly. This describes which of the following annuities? -Installment Immediate -Fixed Installment Deferred -Flexible Installment Deferred -Flexible-Premium Immediate
Flexible Installment Deferred
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n): -Flexible-Premium Deferred annuity -Variable annuity -Immediate annuity -Straight Life annuity
Immediate annuity: it starts providing income payments usually starting within 30 days from the purchase date
How does an indexed annuity differ from a fixed annuity? -Fixed annuity owners receive credited interest tied to the fluctuations of the linked index -Indexed annuity owners receive credited interest tied to the fluctuations of the linked index -Fixed annuity owners have a separate investment account -Indexed annuity owners receive annual dividends
Indexed annuity owners receive credited interest tied to the fluctuations of the linked index
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 for the balance of the 20 years. What type of annuity is this? -Fixed Certain -Joint and Full Survivor -Life Annuity with Period Certain -Installment Refund
Life Annuity with Period Certain
Equity indexed annuities are invested in which of the following -Insurer's general account -Savings bonds -Insured's general account -S&P 500
S&P 500: an indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index - typically the S&P 500
If an annuity is terminated prior to the beginning of the income payment period, the contract owner receives -No refund of money -The contract surrender value at that time -All premiums paid up to the date of termination -Reimbursement of all expenses deducted from the contract value
The contract surrender value at that time
Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT? -The income from the TSA is received income tax-free -The amount contributed is deductible from taxable income -The interest earnings are tax deferred -A tax-sheltered annuity is available to employees of non-profit organizations
The income from the TSA is received income tax-free: Upon retirement, payments received by employees from the accumulated savings in tax-sheltered annuities are treated as ordinary income
An individual who purchases a Life annuity is given protection against: -Inflation -The risk of dying prematurely -The risk of living longer than expected -The risk of not having enough retirement income
The risk of living longer than expected
Which of the following is a characteristic of a variable annuity? -Underlying equity investments -Does not have surrender chargers -Does not provide a transfer of ownership -Selling this product requires only a life license
Underlying equity investments in a separate account
What type of annuity has a cash value that is based upon the performance of its underlying investment funds? -Deferred -Flexible -Variable -Fixed
Variable
