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WME > 14 - Annuity Based Finanial Products > Flashcards

14 - Annuity Based Finanial Products Flashcards

1
Q

Who is the annuitant in an annuity

A

Person on whose life annuity is based

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2
Q

What is the non profit organization that provides protection to policyholders where insurance companies become insolvent

A

Assuris

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3
Q

What does Assuris guarantee

A

Up to $2k per month or 85% of monthly benefit. Whatever is higher

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4
Q

4 main types of annuity

A

Straight life

Joint life

Term certain

Deferred

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5
Q

How do interest rates affect annuities

A

When rates are high, payments tend to be higher

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6
Q

How do term certain annuities work

A

Guarantee to pay for certain number of years, usually to 90

If die before, beneficiary or estate get remaining payments or lump sum

If die after, payments end

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7
Q

Contributions to a non registered deferred annuity are-they tax deductible or not

A

No they are not

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8
Q

How is investment income taxed on deferred annuity

A

After 1989, accrued investment income must be included annually

Before 1989, every 3 years

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9
Q

What hawith money invested in a deferred annuity

A

At end of deferral period it must be cashed in or converted to immediate annuity

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10
Q

Can non registered annuities have beneficiaries

A

Yes

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11
Q

Annuity options of instalment refund annuity

A

If annuitant dies before receiving deposit amount, payments continue to beneficiaries until amount is refunded

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12
Q

Annuity options of life annuity with cash refund

A

If annuitant dies, lump sum paid of remaining unpaid balance

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13
Q

Annuity option of impaired life annuity

A

If reduced life expectancy, evidence must be provided, then payments are larger

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14
Q

Annuity option of participating annuity

A

Payments increase if investment yields are higher or company expenses are lower

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15
Q

Annuity option of indexed annuity

A

Payments increase with formula on cost of living

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16
Q

Annuity option of variable annuity

A

Monthly payments vary according to value of investments in seg fund

Lowest (floor) payment amount is usually 75%

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17
Q

Annuity option of split annuity

A

Funds are slit between immediate/term certain annuity and a deferred annuity

Term certain guarantees income over period, then once they end, lump sum paid from deferred

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18
Q

Annuity option of integrated annuity

A

Made to bridge gap until CPP and OAS. At 65 payments decrease by amount of government benefits

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19
Q

Annuity option of prescribed annuity

A

Spreads tax load, only for non registered

  • usually annuities are taxed high in beginning because your taking interest, then lower at end when principal is left
20
Q

Can deferred annuities be withdrawn

A

Yes, but there may be charges and tax implications

21
Q

What may be charged along with withdrawal charges to break a deferred annuity

A

Market value adjustment may be charged, if interest rates change

2 ways to figure out market value adjustment charges
- if 3 year is redeemed after1, use 1 year rate
- if rates have gone up since issue, they will have to pay a new person a higher interest rate , therefore similar fee to breaking a mortgage

22
Q

Immediate annuity with commutable contract

A

Allow lump sum to beneficiaries instead of payments

23
Q

Non commutable contract for immediate annuities

A

Can not get lump sum payment, must be regular payments

24
Q

Structured settlement

A

Payments of money for a personal injury claim

25
Q

How are structured settlements done

A

Funded through an annuity purchased from a life insurance company

26
Q

Benefits of claimant when annuities are used for structured settlements. 5

A

Lifelong financial security
Upfront cash for immediate needs
Tax savings- payments tax free
Relief from investing and managing investment
Protection from creditors

27
Q

Are annuitants and policyholders the same person

A

Must be for registered seg funds / annuities

28
Q

Assuris coverage for seg funds

A

Up to $60,000 or 85%, whatever is higher

29
Q

What is minimum death and maturity on seg fund

A

Both have to be at least 75%

30
Q

Maturity date of seg fund

A

Usually 10 years from contract date, not sooner by law

31
Q

3 types of maturity guarantee

A

Deposit based, each has own date

Yearly policy based, all deposits within 12 months grouped together with same maturity date

Policy based guarantee,most generous, all maturity guarantee
S on original contract date
* may restrict subsequent deposit amounts

32
Q

With 100% maturity guarantee. 2 things may be required

A

MERs may be higher

Maturity guarantee date may be longer. I.e. 15 years

33
Q

How are seg fun’s withdrawals handled

A

Anytime
Guarantee reduced by withdrawal
Oldest units withdrawn first

34
Q

Age restrictions for seg funds

A

No older than 80 for 10 year guarantee

RRSP must’ve terminated by 71

Non reg 90 years

35
Q

Tax treatment of maturity guarantee

A

Cost of contract is ACB

36
Q

Factors that affect income from annuity

A

Premium amount
Age of annuitant
Interest rate at time of purchase

37
Q

2 phases of GMWB

A

Savings and payouts

38
Q

How saving phase works for GMWB

A

Bonus of 3 - 5% given to investors each year based on initial deposit

39
Q

How payouts phase works with GMWB

A

Investor receives payments based on guaranteed withdrawal amount regardless of markets

40
Q

3 types of guarantee offered with GMWB

A

Income guarantee
Maturity guarantee
Death guarantee

41
Q

Guaranteed withdrawal balance for GMWB

A

100% of initial deposit, base on which income is calculated

No fluctuations with market value

Additional deposits increase it and withdrawal lower it

42
Q

Reset of guaranteed withdrawal balance

A

Every 3 years

If market value is higher, can reset it

43
Q

How income works on GMWB if client under 65

A

Income if guaranteed withdrawal balance

Pays until gone or death if guaranteed for life

44
Q

Income from GMWB if client is over 65

A

It is the lifetime withdrawal amount - this is the lifetime payment 5%

If more is withdrawn, it decreases the guaranteed withdrawal balance

45
Q

When is creditor protection not available on a GMWB

A

When seg or GMWB is used as collateral

Claims due to child or spouse support

Arrears with CRA

46
Q

Breakdown of Assuris coverage for GMWB

A

Savings phase, highest of $60k 85% of guarantee

Payout phase, $2k monthly or 85% go guaranteed income

47
Q

Besides MERs are there other fees for GMWB

A

Yes, annual 25 to 85 basis points, higher if riskier investments.

Covered by redeeming units but this doesn’t factor into payments

WME (11 decks)

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