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FFL Life Course > Annuities > Flashcards

Annuities Flashcards

1
Q 
Which type of contract liquidates an estate through recurrent payments?
<> Annuity
<> Whole life insurance
<> Universal life insurance
<> 401(k)
A

Annuity
~ A contract that provides for the liquidation of all or part of an estate through periodic payments is known as an annuity

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2
Q

Which of the following is a characteristic of a variable annuity?
<> Underlying equity investments
<> Does not provide a transfer of ownership
<> Does not have surrender chargers
<> Selling this product requires only a life license

A

Underlying equity investments

~ Variable annuities involve underlying equity investments in a separate account

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3
Q 
Variable annuities may invest premiums in each of the following, EXCEPT:
<> Money Market securities 
<> Junk bonds
<> Insurer's corporate business account
<> Common Stock
A

Insurer’s corporate business account

~ Variable annuities may invest premiums in each of these EXCEPT the “Insurer’s corporate business account”.

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4
Q 
Which of the following annuities pays benefits on units rather than specific dollar amounts?
<> A Variable annuity
<> A flexible annuity
<> A Single Premium annuity 
<> A Deferred annuity
A

A Variable annuity

~ A variable annuity pays benefits based on units rather than specific dollar amounts

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5
Q

Which of these statements concerning an Individual Straight Life annuity is accurate?
<> Life expectancy of the annuitant is not a factor
<> Payments are made to an annuitant for life
<> The payments are received tax-free
<> Only available to employees of nonprofit charitable, educational, and religious organizations

A

Payments are made to an annuitant for life

~ A Straight Life Annuity pays for the life of the annuitant

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6
Q 
Which of these is an element of a Single Premium annuity?
<> Fixed income
<> Deferred payment
<> Lump-sum payment
<> Tax-deductible
A

Lump-sum payment

~ A lump-sum payment is required for a Single Premium Annuity

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7
Q 
Equity indexed annuities are invested in which of the following?
<> Savings bond
<> S&P 500
<> Insurer's general account
<> Insured's general account
A

S&P 500
~ An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index typically the S&P 500

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8
Q 
An immediate annuity consists of a:
<> Single premium
<> variabel premium
<> flexible premium
<> deferred premium
A

Single premium

~An immediate annuity has as s single premium

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9
Q 
What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
<> Fixed
<> Deferred
<> Variable
<> Flexible
A

Variable

~ A variable annuity’s cash value will depend on the results of its investment funds

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10
Q

An individual who purchases a Life annuity is given protection against:
<> the risk of living longer than expected
<> Inflation
<> the risk of not having enough retirement income
<> The risk of dying prematurely

A

The risk of living longer than expected

~ A life annuity offers protection against the risk of living longer than anticipated

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11
Q 
Which of the following is NOT included in an annuity contract?
<> Nonforfeiture benefit
<> Beneficiary
<> Free-look period 
<> AD&D rider
A

AD&D rider

~ All of these are included in an annuity contract EXCEPT an accidental Death & Dismemberment (AD&D) rider

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12
Q

What is considered to be a characteristic of an immediate annuity?
<> Periodical contributions begin immediately
<> Benefit payments start with 5 years of initial purchase
<> Normally tied to specific equity or stock index
<> Benefit payments start within one payment period of purchase

A

Benefit payments start within one payment period of purchase
~ An immediate annuity is designed to make its first benefit payment to the annuitant at one payment interval from the date of purchase

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13
Q

G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer:
<> Must continue to make monthly payments to G’s beneficiary until the difference is paid
<> Does not have to make any further payments
<> Must continue to make monthly payments to G’s beneficiary for the rest of the beneficiary’s life
<> Must pay G’s beneficiary the difference between the amount paid to G and $50,000 in a lump sum

A

Does not have to make any further payments

~With a Straight Life Annuity, the insurer does not have to make further payments after the annuitant dies

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14
Q 
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
<> Installment immediate
<> Fixed Instalment Deferred
<> Flexible-Premium Immediate
<> Flexible Installment Deferred
A

Flexible Installment Deferred

~ This is an example of a Flexible Installment Deferred annuity

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15
Q 
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
<> Retroactive
<> Universal
<> Deferred
<> Immediate
A

Deferred

~ In this situation, the type of annuity purchased is best described as deferred

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16
Q 
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):
<> Life Annuity with Period Certain
<> Cash Refund
<> Instalment Refund
<> Straight Life annuity
A

Straight Life annuity
~ The Straight Life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company

17
Q 
P is a forty-year-old woman and would like to purchase an annuity that will provide a lifetime income stream beginning at age sixty. Which of the following did she NOT buy?
<> A deferred annuity
<> An immediate annuity
<> A straight life deferred annuity 
<> A straight life annuity
A

An immediate annuity
~ An immediate annuity is designated to make its first benefit payment to the annuitant at one payment interval from the date of purchase

FFL Life Course (13 decks)

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