Annuities Flashcards
What benefit does the installment refund option on an annuity certain payout allow the beneficiary?
To continue to receive the remainder of the monthly income benefits.
Which annuity allows for stock market appreciation with guaranteed downside protection?
An equity-indexed annuity
The contribution phase of an annuity is called the ______________ period.
accumulation period.
What type of annuity provides a predetermined income for life?
A fixed annuity
What licenses are required for an agent to sell variable annuities or variable life?
Both a life insurance license and FINRA Series 6 or 7 license are required.
What is another name for the annuity payout period?
The annuity phase
Who assumes the investment risk in a variable annuity contract?
The client or contract owner
True or False: The annuity owner and the annuitant do not need to be the same person.
True.
An annuity can be purchased for someone other than the owner.
True or False: An annuity with a 20-pay certain annuity payout guarantees at least 20 years of payments will occur.
True.
At least 20 years of payment are guaranteed to the annuitant, the beneficiary, or both.
Periodic annuity payments may be _______ or _________.
level or flexible.
What is another name for the annuity accumulation phase?
The pay-in phase
The ______________ rate is the percentage of the gain kept by an insurer, based on the overall return of an index.
The participation
What is another name for annuity surrender charges?
Back-end loads
n annuitant with a straight-life annuity dies after 9 years. How many years of benefit will his beneficiary receive?
$0. Straight-life payments cease on the death of the annuitant.
Interest earned with a deferred annuity grows on a _______________ basis.
tax-deferred basis.
A client dies soon after annuitizing with a straight-life payout option. Is there a death benefit to a beneficiary?
No. The contract is based on the annuitant’s life only.
Which annuity payout option pays the annuitant for life with no survivorship benefit?
The straight or pure life annuity payout
What is the risk of the straight-life annuity payout option?
There is no beneficiary payout after the annuitant’s death.
Identify the acronym: SPA
Single Premium Annuity
Which annuity payout would have the lower monthly income benefit–a 10- or 20-pay certain period?
The 20-pay certain period would have a lower payment since the guarantee is longer.
What payout option provides payments for the annuitant’s whole life, but will cease at death?
The Straight-Life Payout option
An annuitant with a 20-year certain annuity dies after 7 years, how many years of benefits will a beneficiary receive?
The beneficiary will receive the remaining 13 of the 20 years.
What annuity’s growth is dependent on the performance of securities in a separate account?
A variable annuity
Which annuity provides a guaranteed return–fixed or variable?
Fixed annuities
The payout phase of an annuity may also be referred to as the _________ phase.
annuity phase.
What annuity payout option pays income to more than one party and stops upon death of any party listed on the contract?
The Joint Life option
What is another name for a pure life annuity?
A straight life or life annuity
Traditional contract assets are placed in the insurance company’s _________ account.
general account.
The annuity benefit of a woman would be ____ than a man’s because a woman is expected to ______________.
The annuity benefit of a woman would be LESS than a man’s because a woman is expected to LIVE LONGER.
What is the benefit of the Straight-Life payout option to the annuitant?
It provides the highest monthly income
What is the annuity nonforfeiture value?
The value of an annuity minus any surrender fees
What type of annuity is designed to pay income at a later date?
A deferred annuity
All variable contract assets are placed in the insurance company’s __________ account.
separate account.
What modification is made to the straight-life payout option to guarantee payments for a minimum number of years?
Attaching a period certain to a payout
What is the only method used to fund an immediate annuity?
Lump-sum contribution
Annuity premiums may be paid as a __________, or on a ________ basis.
Annuity premiums may be paid as a LUMP-SUM, or on a PERIODIC basis.
Identify the acronym: SPDA
Single Premium Deferred Annuity
Inflation risk would be a concern for an owner of a _______ annuity.
fixed annuity.
A single premium annuity may also be called a __________ annuity.
lump-sum annuity.
What annuity provides a monthly income that varies depending on market performance?
A variable annuity
The cash refund option of an annuity certain payout provides the beneficiary a __________ refund of remaining benefits.
lump-sum
Which annuity option does not guarantee an income for life, but rather an income for a predetermined number of years?
The Annuity Certain option
An annuity is designed to protect a person against ___________ his income.
An annuity is designed to protect a person against outliving his income.
At annuitization (payout), accumulation units are exchanged for _________ units.
annuity units.
Annuity withdrawals prior to age 59 1/2 will be subject to a ___% IRS penalty plus __________________ of earnings.
Annuity withdrawals prior to age 59 1/2 will be subject to a 10% IRS penalty plus FEDERAL TAXATION of earnings.
Withdrawals from an annuity may not take place prior to age _______ without penalty.
59 1/2
Describe a flexible premium deferred annuity.
Flexible payments (subject to monthly minimum), with tax-deferred growth until later withdrawn (e.g., at retirement)
What is the purpose of an annuity?
To provide an income that the annuitant cannot outlive
What account is used for the placement of an insurance company’s variable contract assets?
A separate account
Which annuity provides a fixed, guaranteed minimum rate of return?
A fixed annuity
A flexible premium annuity usually requires a _________ monthly contribution.
minimum monthly contribution.
Interest earned within an annuity grows ______________.
tax-deferred.
True or False: A flexible premium deferred annuity is designed for future income.
True
What factors affect the annuity payout amount?
Interest rates, contribution amounts, and payout option selected
True or False: Joint and last survivor payouts will cease after the first annuitant dies.
False.
The joint and last survivor payouts continue payment until the last surviving annuitant dies.
If an annuity owner dies during the accumulation phase, what would the beneficiary be entitled to receive?
The higher of the total contributions or contract value on the date of death
Which type of annuity would most likely be considered a security–fixed or variable?
A variable annuity
An immediate annuity must begin making income payments within ____ days of the initial deposit.
30 days
What type of annuity has no accumulation period?
A lump-sum or single premium annuity
Annuitization is described as the _________________________ of an estate or pool of money.
systematic liquidation
True or False: An annuity contract uses different mortality tables than a life insurance policy.
True
Currently, ___________ companies are the only type of company that may sell annuities.
insurance
