14.1a

Question 1

An Annuity is a financial vehicle that provides income at a future date in an individual’s life and is commonly used to save up for ______. An annuity is considered to be a form of insurance that provides future income to an individual while still alive, instead of when he or she dies. As a financial product offered by financial institutions and insurance companies, money is deposited either as a lump sum or as a series of payments by the owner of the annuity to a financial institution which then invests the money, tax-deferred, in order to earn interest and accumulate value for the investment.

Answer 1

higher education costs or as a retirement savings fund

Question 2

Later in the annuity owner’s life, payments are distributed back from the financial institution along with the investment’s earned interest. An insurance company is able to offer annuities because of its ability to ______

Answer 2

guarantee annuity payments for the entirety of the annuitant’s life, regardless of the age of the individual.

Question 3

4 parties involved in an annuity are the insurance company, owner of the annuity, annuitant, and ______.

Answer 3

beneficiary

Question 4

An annuity is a legally binding contract involving an insurance company (or other financial institution), the owner of the annuity, an annuitant, and the annuity’s beneficiary. Although the owner of the annuity contract is often ______, both roles are unique to the contract.

Answer 4

the same individual as the annuitant

Question 5

The annuity’s owner is responsible for depositing funds in the form of premium payments into the annuity as well as for all taxes owed from the annuity’s earned interest. In return, the insurer ______, depending on whether the annuity is ‘fixed’ or ‘variable,’ and over time the annuity builds value.

Answer 5

invests the owner’s premium payments in stocks, bonds or securities