ND Life - Annuities
What are the two phases of an annuity?
Accumulation and annuitization (or pay-in and pay-out)
Who receives income payments from an annuity?
Annuitant
Who possesses all the rights in an annuity?
Annuity owner
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
Who qualifies for tax-sheltered annuities, or 403(b) plans?
employees of nonprofit organizations under Section 501(c)(3) and employees of public school systems
What qualified plan is suitable for the self-employed?
HR-10 or Keogh
Liquidation of an estate
converting a person's net worth into a cash flow
Life contingency
dependent upon whether or not the insured is alive
If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?
joint life annuity
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
the annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death
Whose life expectancy is taken into consideration in an annuity contract?
annuitant
What is the penalty for excessive contributions to a traditional IRA?
6%
What are the two types of refund life annuities?
Cash refund and installment refund
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 life expectancy.
How long is income paid under a pure life annuity?
Only for the life of the annuitant
The annuitant dies while the annuity is still in the accumulation stage. What happens next?
The beneficiary will receive the greater of the money paid into the annuity or the cash value. 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.
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? a. $50,000 b. $62,500 c. $75,000 d. Nothing
a. $50,000 The life policy would pay the face amount, but because of the settlement option selected on the annuity, payments would cease upon the annuitant's death. Straight life annuity payments stop at death of the annuitant regardless of the principal left in the account.
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? a. Immediate b. Flexible c. Deferred d. Variable
a. Immediate With an immediate annuity, distribution starts within 1 year of purchase
Which of the following best describes a bail-out provision? a. It waives the surrender charge for the annuitant confined to a long-term care facility b. It allows the owner to receive a higher interest rate at certain timeframe c. It decreases the annuity surrender value d. It allows the owner to surrender the annuity without a charge
d. It allows the owner to surrender the annuity without a charge Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.
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? a. The premium value will be paid to the annuitant's estate b. All benefits will be forfeited c. The cash value will be paid to the state government d. The cash value will be paid to the annuitant's estate
d. The cash value will be paid to the annuitant's estate
The main difference between immediate and deferred annuities is a. How the annuity is purchased b. The number of insureds c. The amount of each payment d. When the income payments begin
d. When the income payments begin Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year
What is required to qualify an individual to contribute to a traditional IRA?
earned income
What are the two classifications of annuities according to the time when annuity payments begin?
immediate and deferred
In what form of payment must the contributions to a traditional IRA be made?
in cash
SIMPLE plans are available to groups of how many employees?
no more than 100
In flexible premium payment annuities, the term "flexible" refers to what?
amount of premium
Which of the following products will protect an individual from outliving their money? a. permanent life insurance b. annuity c. joint and survivor policy d. adjustable life policy
b. annuity an annuity is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving their money
Which of the following can surrender a deferred annuity contract? a. A deferred annuity cannot be surrendered b. Only the annuity owner c. Only the insurance company for nonpayment of premiums d. The beneficiary after the owner's death
b. only the annuity owner
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
beneficiary
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a. Nonforfeiture b. Annuitization c. Bail-out d. Surrender
c. Bail-out Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.
Which of the following is NOT fundable by annuities? a. A person's retirement b. Estate liquidation c. Death benefits d. Cash accumulation for any reason
c. Death benefits Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?
current
Equity indexed annuities a. Are more risky than variable annuities b. Are security instruments c. Invest conservatively d. Seek higher returns
d. Seek higher returns Equity Indexed Annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity the Equity Indexed Annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tired to a familiar index like the Standard and Poor's 500
What are the income tax benefits of a qualified plan?
employer contributions are tax deductible and are not taxed as income to the employee. The earnings accumulate tax deferred.
How soon can income payments begin in an immediate annuity?
no later than 1 year from the time of annuity purchase
Who bears the investment risk in a fixed annuity?
the insurer
Annuitant
the person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written.
Deferred
withheld or postponed until a specified time or event in the future
Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? a. Fixed amount b. Variable period c. Variable amount d. Fixed period
a. Fixed amount 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.
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? a. The annuitant will receive the higher of either the guaranteed minimum rate or current rate b. The annuitant will always receive the current interest rate c. The annuitant will receive the lower of either the guaranteed minimum rate or current rate d. The annuitant will only receive the guaranteed minimum specified in the contract
a. The annuitant will receive the higher of either the guaranteed minimum rate or current rate In a fixed annuity, the insurer invests the principal and gives the annuitant a guaranteed interest rate based on a minimum rate specified in the annuity, or current interest rate, whichever is higher
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
annuitant's estate
In an annuity, the accumulated money is converted into a stream of income during which phase? a. Conversion period b. Annuitization period c. Payment period d. Amortization period
b. Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream
What are the consequences of withdrawing funds from a traditional IRA prior to the age of 59 1/2 ?
10% penalty
IRS
Internal Revenue Service: a US Government agency responsible for collecting of taxes, and enforcement of the Internal Revenue Code
What are accumulation units in annuities?
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
What is the primary purpose of a 401(k) plan?
Provide retirement income
What type of plan is 401(k)?
Qualified profit-sharing plan
What happens if a deferred annuity is surrendered before the annuitization period?
The owner will receive the surrender value of the annuity. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.
An annuity
a contract that provides income for a specified period of years, or for life. Protects individuals against outliving their money.
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? a. Annuity certain b. Fixed annuity c. Refund life d. Variable annuity
a. Annuity certain Annuity Certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.
In an annuity, the accumulated money is converted into a stream of income during which time period? a. Conversion period b. Annuitization period c. Payment period d. Amortization period
b. Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream
The term "fixed" in a fixed annuity refers to all of the following EXCEPT a. Amount and length of payments b. Death benefit c. Guaranteed rate of interest d. Equal annuity payments
b. Death benefit A fixed annuity is fixed in the sense that is provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the
If an annuitant dies before annuitization occurs, what will the beneficiary receive? a. Cash value of the plan b. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount c. Either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount d. Amount paid into the plan
b. Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount If an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is greater.
If a deferred annuity is surrendered prematurely, a surrender charge is imposed. How is the surrender charge determined? a. It is a flat fee determined by the annuity owner when the annuity is purchased b. It will increase as the accumulation period increases c. It is a percentage of the cash value and decreases over time d. It is always 7% of the cash value
c. It is a percentage of the cash value and decreases over time If a deferred annuity is surrendered prematurely, a surrender charge is imposed. The charge is generally a percentage that reduces over time until it ends.
Which of the following is TRUE regarding the accumulation period of an annuity? a. It is a period of time during which the beneficiary receives income b. It is limited to 10 years c. It is a period during which the payments into the annuity grow tax deferred d. It is also referred to as the annuity period
c. It is a period during which the payments into the annuity grow tax deferred 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
Under a pure life annuity, an income is payable by the company a. For a guaranteed period of time, whether or not the annuitant survives to the end of that period b. For as long as either the annuitant or a named beneficiary is alive c. Only for the life of the annuitant d. Until the principal and interest are exhausted
c. Only for the life of the annuitant With pure life annuity, income payments cease at the annuitant's death and there is no refund or payments to survivors. This type of annuity is also referred to as Life Only or Straight Life.
Which of the following is NOT true regarding the annuitant? a. The annuitant receives annuity benefits b. The annuitant must be a natural person c. The annuitant cannot be the same person as the annuity owner d. The annuitant's life expectancy is taken into consideration for the annuity
c. The annuitant cannot be the same person as the annuity owner While they done have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
All of the following statements about equity index annuities are correct EXCEPT a. The interest rate is tied to an index such as the Standard & Poor's 500 b. They invest on a more aggressive basis aiming for higher returns c. The annuitant receives a fixed amount of return d. They have a guaranteed minimum interest rate
c. The annuitant receives a fixed amount of return Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield
If an annuitant dies before annuitization occurs, what will the beneficiary receive? a. amount paid into the plan b. cash value of the plan c. either the amount paid into the plan or the cash value of the plan, whichever is the greater amount d. either the amount paid into the plan or the cash value of the plan, whichever is the lesser amount
c. either the amount paid into the plan or the cash value of the plan, whichever is the greater amount if an annuitant dies before annuitization, the beneficiary will receive either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
Fixed annuities provide all of the following EXCEPT a. minimum guaranteed rate of interest b. Future income payments c. hedge against inflation d. equal monthly payments for life
c. hedge against inflation fixed annuities invest premium payments into a general account - a safe and conservative investment portfolio. They also provide a specified dollar amount for each annuity payment regardless of the purchasing power of the money. Variable annuities premiums are invested in securities, hopefully maintaining a constant purchasing power, and therefore providing protection against inflation.
What happens if a deferred annuity is surrendered before the annuitization period? a. The owner will only receive a refund of premium b. The insurer can only apply the surrender value toward another annuity c. Deferred annuities cannot be surrendered prior to the annuitization period d. The owner will receive the surrender value of the annuity
d. The owner will receive the surrender value of the annuity If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision
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? a. a corporation can be an annuitant as long as it is also the owner b. a corporation can be an annuitant is long as the beneficiary is a natural person c. the contract can be issued without an annuitant d. the annuitant must be a natural person
d. the annuitant must be a natural person Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity
If the annuitant dies before the annuitization period starts, what will the beneficiary receive?
either the amount paid into the annuity or the cash value, whichever is greater
How long will a life annuity with a 15-year period certain pay?
for the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years
What is the difference between a single premium and a flexible premium payment options in a deferred annuity?
the number of payments that purchase the annuity
Owner of the annuity
the purchaser of the annuity contract. Not necessarily the one who receives the benefits. Has all rights such as naming the beneficiary and surrendering the annuity. Can be a corporation, trust, or other legal entity.
What is the main reason for purchasing an annuity?
to provide income that the annuitant cannot outlive
What type of annuity requires an agent to have a securities license?
variable annuity
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? a. The annuitant must be a natural person b. A corporation can be an annuitant as long as it is also the owner c. A corporation can be an annuitant as long as the beneficiary is a natural person d. The contract can be issued without an annuitant
a. The annuitant must be a natural person Owners of annuities can be individuals or entities like corporations and trusts, but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
If the annuitant dies during the accumulation period, who will receive the annuity benefits? a. the beneficiary b. the annuity owner c. the insurance company d. the annuitant's estate
a. the beneficiary 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
An individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have?
annuity
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?
life income with period certain
An employer is sponsoring a qualified retirement plan for its employees where the employer contributes money whenever the business has profit. What is this type of plan called?
profit-sharing plan
All of the following are true of an annuity owner EXCEPT a. The owner must be the party to receive benefits b. The owner pays the premiums on the annuity c. The owner has the right to name the beneficiary d. The owner is the party who may surrender the annuity
a. The owner must be the party to receive benefits The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money? a. an annuity b. a survivorship life policy c. a universal life policy d. a group policy
a. an annuity an annuity is a contract used to accumulate funds that are to be distributed at a specified time in the future as periodic payment of accumulated funds
In an annuity, the accumulated money is converted into a stream of income during which phase?
annuitization period
Which of the following is NOT true regarding Equity Indexed Annuities? a. They have guaranteed minimum interest rates b. They are less risky than variable annuities c. They earn lower interest rates than fixed annuities d. The insurance company keeps a percentage of the returns
c. They earn lower interest rates than fixed annuities Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death? a. installment refund b. joint and survivor c. pure life d. life with a guaranteed minimum
c. pure life A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the annuitant's death?
pure life
How are annuities classified depending on how many lives they cover?
single life and multiple life annuities
Which of the following can surrender a deferred annuity contract? a. The beneficiary after the owner's death b. A deferred annuity cannot be surrendered c. Only the annuity owner d. Only the insurance company for nonpayment of premiums
c. Only the annuity owner If the need arises, a deferred annuity contract may be surrendered only by the annuity owner. At surrender the owner receives the value of the annuity minus a surrender charge.
What is a disadvantage of owning a fixed annuity, as opposed to variable?
in times of inflation, the benefit of a fixed annuity will have decreased purchasing power
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a. the beneficiary will receive the greater of the money paid into the annuity or the cash value b. the owner's estate will receive the money paid into the annuity c. the insurance company will retain the cash value and pay back the premiums to the owner's estate d. the money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary
a. the beneficiary will receive the greater of the money paid into the annuity or the cash value 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.
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? a. Variable annuity b. Annuity certain c. Fixed annuity d. Refund life
b. Annuity certain Annuity Certain option allows the annuitant to select the time period or the amount of the benefits to be paid out. Under the installments for a fixed period, distribution begins on a specific date and stops on a specific date.
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? a. Deferred interest annuity b. Immediate annuity c. Variable annuity d. Flexible payment annuity
b. Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement
All of the following are true of an annuity owner EXCEPT a. The owner is the party who may surrender the annuity b. The owner must be the party to receive benefits c. The owner pays the premiums on the annuity d. The owner has the right to name the beneficiary
b. The owner must be the party to receive benefits The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant (if different from the owner) or the beneficiary.
Which of the following ultimately determines the interest rates paid to the owner of a fixed annuity? a. Statewide predetermined annual interest rate b. Insurer's guaranteed minimum rate of interest c. Investment performance of the company d. Investment performance of the insured
b. Insurer's guaranteed minimum rate of interest With fixed annuities, the company is required to pay at least a guaranteed minimum rate of interest to the owners. If the company investments perform well, the company will pay a higher interest rate, but since the interest rate can never fall below the guaranteed minimum, that's what ultimately determines what the company will pay.
What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?
straight life
If a retirement plan is 'qualified', what does that mean?
the plan has favorable tax treatment
Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a. Annuitization b. Bail-out c. Surrender d. Nonforfeiture
b. Bail-out Some annuity contracts contain a bail-out provision. This provision allows the owner to surrender the annuity without charge if interest rates drop a specified amount within a certain timeframe.
The main difference between immediate and deferred annuities is a. The amount of each payment b. When the income payments begin c. How the annuity is purchased d. The number of insureds
b. When the income payments begin The main difference between immediate and deferred annuities is when the income payments begin. Immediate annuities will begin payments within the first year, while deferred annuities will not begin payments until sometime after the first year.
What causes a variable annuity benefit to vary?
The annuity's underlying investments
What are some examples of qualified plans?
IRA, 401(k), HR-10 (Keogh), SEP, SIMPLE
Can a business or a corporation be an annuitant?
No, an annuitant must always be a natural person
In qualified plans, are employer contributions taxed as income to the employees?
No, employer contributions are not taxed as income to the employees
Natural person
a human being
What type of license(s) is/are required in order to sell variable annuities?
a life insurance license and a securities license
Suitability
a requirement to determine if an insurance product or an investment is appropriate for a particular customer
Qualified plan
a retirement plan that meets IRS guidelines for receiving favorable tax treatment
All of the following are true of an annuity owner EXCEPT a. the owner pays the premiums on the annuity b. the owner has the right to name the beneficiary c. the owner is the party who may surrender the annuity d. the owner must be the party to receive benefits
d. the owner must be the party to receive benefits the "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who received the benefits; it could be the annuitant (if different from the owner) or the beneficiary
When an annuity is written, whose life expectancy is taken into account? a. Annuitant b. Beneficiary c. Life expectancy is not a factor when writing an annuity d. Owner
a. Annuitant
An agent selling variable annuities must be registered with a. FINRA b. Department of Insurance c. The Guaranty Association d. SEC
a. FINRA Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? a. Liquidation period b. Depreciation period c. Annuitization period d. Pay-out period
b. Depreciation period The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation, or pay-out period.
The annuitant dies while the annuity is still in the accumulation stage. Which of the following is TRUE? a. The money will continue to grow tax-deferred until the liquidation period, and then will be paid to the beneficiary b. The beneficiary will receive the greater of the money paid into the annuity or the cash value c. The owner's estate will receive the money paid into the annuity d. The insurance company will retain the cash value and pay back the premiums to the owner's estate
b. The beneficiary will receive the greater of the money paid into the annuity or the cash value
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. Installment refund b. Joint and survivor c. Straight life d. Life income with period certain
c. Straight life 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.
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? a. Variable annuity b. Flexible payment annuity c. Deferred interest annuity d. Immediate annuity
d. Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement.
All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT a. It will pay the benefit only for a designated period of time b. The payments are not guaranteed for life c. The insurer determines the amount for each payment d. It is a life contingency option
d. It is a life contingency option Under the installments for a fixed period annuity settlement option, the annuitant selects the time period for the benefits; the insurer determines how much each payment will be. This option pays for a specific amount of time only, and there are no life contingencies.
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? a. Joint and survivor b. Life with certain period c. Joint limited annuity d. Joint life
d. Joint life Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first
For a retirement plan to be qualified, it must be designed for whose benefit?
employees
What type of annuity credits its interest based upon an index such as S&P 500?
equity indexed annuity
An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?
flexible premium deferred annuity
What type of annuity can be purchased with a single premium?
immediate annuity
With a single premium deferred annuity, when will the annuity payments become available?
no sooner than 1 year after the annuity purchase
In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? a. The annuitant will receive the higher of either the guaranteed minimum rate or the current rate b. The annuitant will always receive the current interest rate c. The annuitant will receive the lower of either the guaranteed minimum rate or current rate d. The annuitant will only receive the guaranteed minimum specified in the contract
a. The annuitant will receive the higher of either the guaranteed minimum rate or current rate With a fixed annuity, the insurer invests the principal and gives the annuitant a guaranteed interest rate based on a minimum rate specified in the annuity, or current interest rate, whichever is higher
A married couple's retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select? a. Straight life b. Joint and survivor c. Joint annuity d. Cash refund annuity
b. Joint and survivor Under a joint settlement option, payments would stop at the first death, but under the joint and survivor, payment would continue until both recipients die. Usually, the surviving beneficiary receives 1/2 or 2/3 of the amount received when both beneficiaries were alive.
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 a. Deferred annuity b. Pure annuity c. Joint life annuity d. Joint and survivor annuity
c. Joint life annuity Joint life annuity settlement option pays benefits to two or more annuitants, but stops upon the death of the first
