5.1 Annuities Flash Flashcards
How are annuities classified depending on how many lives they cover
single life and multiple life annuities
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
Who receives income payments from an annuity
annuitant
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
What annuity settlement option provides income payments to the annuitant for the duration of their life and ceases at their death?
pure life
“life-only or straight life”
what is the disadvantage of owning a fixed annuity, as opposed to a variable?
In times of inflation, the benefit of a fixed annuity will have decreased purchasing power
what type of license(s) is/are required in order to sell variable annuities
insurance and securities
At annuity purchased within multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuitity?
flexible (premium deferred) annuity
who possesses all rights in an annuity
annuity owner
what type of annuity can be purchased with a single premium
immediate annuity
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid
annuitant’s estate
what type of annuity credits its interest based upon an index such as S&P500.
equity indexed annuity
what type of annuity requires an agent to have a securities license?
variable annuity
In an annuity, the accumulated money is converted into a stream of income during which phase?
annuitization period
how long is income paid under a pure life annuity
only for the life of the annuitant
what are the two phases of an annuity?
accumulation and annuitization (or pay-in and pay-out)
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
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
what causes a variable annuity benefit to vary?
the annuity’s underlying investments
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
In flexible premium payment annuities, the term “flexible” refers to what?
amount of premium
How soon can income payments begin in an immediate annuity?
No later than 1 year from the time of annuity purchase
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
beneficiary
What type of annuity is suitable for someone who want to select the benefits option that will pay the largest amount only for as long as the annuitant lives?
straight life
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
Who bears the investment risk in a fixed annuity?
the insurer
What are the two classifications of annuities according to the time when annuity payments begin?
immediate and deferred
whose life expectancy is taken into consideration in annuity contract
annuitant
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
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
what is the main reason for purchasing an annuity
to provide income that the annuitant cannot outlive
with a single premium deferred annuity, when annuity payments do become available
No sooner than 1 year after the annuity purchase
What are the accumulation units in annuities
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
What are the two types of refund life annuities?
cash refund and installment
can a business or corporation be an annuitant?
No, an annuitant must always be a natural person.
