Annuities Flashcards

1
Q

403(b) plan

A

retirement plan for certain employees of public schools employees of specific tax exempt organizations, and ministers

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2
Q

1035 contract exchange

A

if annuity is exchanged for another annuity, a gain is not realized. annuity cannot be exchanged for a tax-free life insurance policy. This particular provision allows policyholder to transfer funds from a life insurance/endowment/annuity to a new policy without having to pay taxes

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3
Q

accumulation period

A

when premiums an annuitant pays in to annuities are credited as accumulation units; may continue between time after premiums average ceased but payout has not begun. at end of accumulation period, accumulation units are converted to annuity units

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4
Q

annuity units

A

value of contributions made by annuitant.

value=credit to the account and varies depending on the value of the stock investment

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5
Q

cash refund option

A

upon death and before all payments have been made, the excess amount paid by purchaser over the total payments received will be paid in one sum to beneficiaries

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6
Q

deferred annuity

A

postponement of payments until a specified period of time or until annuitant reaches a certain age
-purchase this with single or flexible premiums

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7
Q

equity index annuity

A

fixed deferred annuity, offers guarantee minimum interest rate and excess interest feature based on the current market index

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8
Q

exclusion ratio

A

faction used to determine amount of annual annuity income exempt for federal income tax; total contributions in annuity/expected ratio

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9
Q

fixed annuity

A

guaranteed rate of return; interest payable in any year is given in advance by insurer and is no less than minimum specified in the contract; this is risky for insureres

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10
Q

immediate annuity

A

provide payment of annuity benefit at one payment interval from date of purchase; purchase only with single payment; typically begin paying income within 1 month of purchase

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11
Q

joint life and survivor option

A

if either person dies, the income payments go to the survivor for life; when survivor dies, no payments are made to anyone

  • full: pays same benefit amount to survivor
  • 2/3: pays 2/3 of original joint benefit
  • 1/2: pays 1/2 of original joint benefit
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12
Q

life with period certain annuity (life income with term optoin)

A

provides income to annuitant for life but guarantees a min period of payments; if death during this period, beneficiary get the payments for remainder of period

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13
Q

market value adjustment

A

attached to a deferred annuity, featuring guarantee fixed interest rates combined with interest rate adjustment factor (rates that increase or decrease in response to the market)

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14
Q

period certain annuity

A

annuity income option that guarantees definite minimum period of payments, as opposed to annuity which gives out when annuity dies

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15
Q

periodic payment annuity (flexible premium)

A

annuity owner making mulitple premium payments to accumulate principal. typically flexible with frequency and amount

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16
Q

principal

A

original sum of money paid into annuity through premiums

17
Q

single premium annuity

A

entire premium is paid in one sum at the beginning of the contract period. can be deferred or immediate single premium

18
Q

straight life annuity

A

guaranteed income of annuitant’s lifetime, and the stops after death

19
Q

variable annuity

A

payments will be made periodically and the amount fluctuates with common stock; given in separate accounts instead of general accounts; to sell this, agent must have Financial Industry Regulatory Authority (another license)

20
Q

annuitant

A

one who annuity is payable