14.1b

Question 1

When the annuity matures it ‘annuitizes,’ meaning that the contract begins to distribute both the Invested Principal and ______ to the annuitant to serve as future income. If the annuitant dies before the contract is annuitized, the contract’s beneficiary becomes the receiver of the contract’s payout.

Answer 1

Earned Interest

Question 2

Both the owner and insurer benefit from an annuity contract because ______.

Answer 2

both parties earn interest on the invested payments by the owner

Question 3

During the annuity’s growth period, known as the Accumulation Period, interest that is earned by the investment is ‘compounded,’ or reinvested on a tax-deferred basis, thus allowing for a greater accumulation of funds for the annuitant. By compounding the interest, each year’s returns are ______, thus providing the annuitant with an exponential growth rate.

Answer 3

re-invested

Question 4

Once the contract annuitizes, a second period, called the ______, or ‘payout’ period, begins. During this period, the interest that accumulates is taxed appropriately as ‘gains,’ or earnings, on the investment; however, since the invested funds paid into the annuity using after-tax dollars, only the earned interest, or gains, on the investment are taxed.

Answer 4

Annuity Period

Question 5

The invested funds and earned interest can be distributed back to the annuitant in a variety of ways such as over a certain period of time, at a specific monetary amount per payment, or it can even serve as a ______.

Answer 5

death benefit to an annuitant’s designated beneficiary