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ChFC HS311 FP:FUNDAMENTALS OF INSURANCE PLANNING > ANNUITIES > Flashcards

ANNUITIES Flashcards

1
Q

ACCUMULATION PHASE

A

THE PERIOD OVER WHICH ANNUITY FUNDS ARE ACCUMULATED

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2
Q

ANNUAL RESET METHOD

A

THE INDEX-LINKED INTEREST CREDITING RATE IS DETERMINED EACH YEAR BY COMPARING THE INDEX VALUE AT THE END OF THE CONTRACT YEAR WITH THE INDEX VALUE AT THE BEGINNING OF THE CONTRACT YEAR. INTEREST IS THEN ADDED TO THE ANNUITY EACH YEAR DURING THE TERM

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3
Q

ANNUITANT

A

THE INDIVIDUAL UPON WHOSE LIFE THE CONTRACT IS DEPENDENT. IT IS GENERALLY THE LIFE EXPECTANCY OF THE ANNUITANT THAT AFFECTS THE TIMING AND AMOUNT OF PAYOUT UNDER THE CONTRACT

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4
Q

ANNUITIZATION

A

THE TIME WHEN THE ANNUITY FUNDS ARE EXCHANGED FOR A STREAM OF INCOME GUARANTEED FOR A PERIOD OF TIME

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5
Q

ANNUITIZED

A

THE TIME WHEN REGULAR, PERIODIC (SUCH AS MONTHLY OR ANNUAL) PAYMENTS BEGIN FOR LIFE OR FOR A SPECIFIED PERIOD OF TIME IN EXCESS OF ONE YEAR

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6
Q

ANNUITY

A

A CONTRACT BETWEEN AN INDIVIDUAL (ANNUITANT) AND AN INSURANCE COMPANY WHICH PROMISES TO PAY AN INCOME ON A REGULAR BASIS FOR A SPECIFIED PERIOD OF TIME

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7
Q

BENEFICIARY

A

THOSE PERSONS ENTITLED TO THE DEATH BENEFIT OF THE ANNUITY

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8
Q

CAP RATE

A

SOME INDEXED ANNUITIES IMPOSE AN UPPER LIMIT ON THE INDEX-LINKED INTEREST RATE

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9
Q

CASH REFUND ANNUITY

A

GUARANTEES THAT THE ANNUITANT OR THE ANNUITANTS FAMILY WILL RECEIVE THE PREMIUM PAYMENTS MADE TO PURCHASE THE ANNUITY, BUT INSTEAD OF CONTINUING TO MAKE PERIODIC PAYMENTS UNTIL THERE IS A FULL RECOVERY OF THE PREMIUM, THE BALANCE IS PAID IN CASH AT THE ANNUITANTS DEATH

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10
Q

DEFERRED ANNUITY

A

AN ANNUITY CONTRACT THAT DOES NOT BEGIN PAYMENTS IMMEDIATELY, BUT WAITS UNTIL SOME FUTURE TIME TO START PAYMENTS

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11
Q

EQUITY-INDEXED ANNUITIES

A

HAVE CHARACTERISTICS OF BOTH FIXED AND VARIABLE ANNUITIES, EITHER IMMEDIATE OR DEFERRED, THAT EARN INTEREST OR PROVIDE BENEFITS THAT ARE LINKED TO AN EXTERNAL EQUITY REFERENCE OR AN EQUITY INDEX

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12
Q

50% JOINT AND SURVIVOR ANNUITY

A

PAYS THE SURVIVOR 50% OF THE ANNUITY PAYMENT AFTER THE DEATH OF THE FIRST ANNUITANT. THE INITIAL ANNUITY PAYMENT WILL BE LARGER THAN WITH A 100% OR 75% JOINT AND SURVIVOR ANNUITY

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13
Q

FIXED ANNUITY

A

THE MOST CONSERVATIVE TYPE OF ANNUITY THAT EARNS A MINIMUM GUARANTEED RATE OF RETURN

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14
Q

FLEXIBLE PREMIUM ANNUITY

A

ALLOWS THE INSURED THE OPTION TO VARY PREMIUM DEPOSITS

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15
Q

FLOOR CREDITING RATE

A

AN INDEXED ANNUITY IS THE MINIMUM INDEX-LINKED INTEREST RATE THAT WILL BE CREDITED TO THE CONTRACT IN A GIVEN PERIOD

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16
Q

FREE WITHDRAWAL PROVISION

A

ALLOWS THE CONTRACT HOLDER THE RIGHT TO WITHDRAW UP TO A STATED PERCENTAGE (USUALLY 10 PERCENT) OF THE CONTRACT VALUE ANNUALLY WITHOUT INCURRING A SURRENDER CHARGE

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17
Q

GUARANTEE FUNDS

A

RUN BY THE STATE INSURANCE COMMISSION, THEY ACT AS THE PAYOR OF LAST RESORT IN THE CASE OF AN INSURANCE COMPANY FAILURE

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18
Q

HIGH WATERMATRK APPROACH

A

DETERMINING INDEX-LINKED INTEREST IS ACCOMPLISHED BY COMPARING THE VALUE OF THE INDEX AT VARIOUS POINTS DURING THE TERM (USUALLY ON ANNIVERSARY DATES)

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19
Q

IMMEDIATE ANNUITY

A

AN INSTRUMENT CREATED WHEN THE CONTRACT OWNER TRADES A SUM OF MONEY IN RETURN FOR A STREAM OF INCOME THAT BEGINS IMMEDIATELY

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20
Q

INDEX TERM

A

THE PERIOD OVER WHICH INDEX-LINKED INTEREST IS CALCULATED FOR EQUITY-INDEXED ANNUITIES

21
Q

INDEXING METHOD

A

THE APPROACH USED TO MEASURE THE AMOUNT OF CHANGE, IF ANY, IN THE INDEX. SOMECOMMON INDEXING METHODS INCLUDE: (1)THE ANNUAL RESET (RATCHETING) APPROACH, (2)THE HIGH WATERMARK APPROACH, (3) THE POINT-TO-POINT APPROACH

22
Q

INFLATION

A

THE INCREASE IN THE GENERAL PRICE LEVEL AND IS OFTEN MEASURED BY THE CONSUMER PRICE INDEX (CPI)

23
Q

INITIAL RATE

A

THE FIRST RATE OF INTEREST THAT IS EARNED UNDER A FIXED ANNUITIES CONTRACT AND IS GUARANTEED FOR A SPCIFIED PERIOD OF TIME

24
Q

INSTALLMENT REFUND ANNUITY

A

A SPECIAL TYPE OF TERM CERTAIN ANNUITY WHEREBY THE INSURER PROMISES TO CONTINUE PERIODIC ANNUITY PAYMENTS AFTER THE ANNUITANT HAS DIED UNTIL THE SUM OF ALL ANNUITY PAYMENTS MADE EQUALS THE PURCHASE PRICE OF THE ANNUITY

25
Q

IRD ASSETS

A

ASSETS THAT HAVE A DEFERRED INCOME TAX LIABILITY THAT WAS NOT PAID PRIOR TO THE DATE OF THE OWNERS DEATH

26
Q

JOINT AND SURVIVOR ANNUITY

A

PROMISES TO MAKE PAYMENTS OVER THE LIVES OF TWO OR MORE ANNUITANTS. ANNUITY PAYMENTS ARE MADE UNTIL THE LAST ANNUITANT DIES. THIS IS COMMONLY USED TO FUND THE RETIREMENT CASH-FLOW NEEDS OF MARRIED COUPLES. A 100PERCENT JOINT AND SURVIVOR ANNUITY PAYS THE SPECIFIED MONTHLY PAYMENT TO THE ANNUITANTS WHILE BOTH ARE ALIVE AND CONTINUES TO MAKE THE SAME PAYMENT TO THE SURVIVOR AFTER THE FIRST ANNUITANTS DEATH. A 75 PERCENT JOINT AND SURVIVOR ANNUITY PAYS THE SPECIFIED MONTHLY PAYMENT TO THE ANNUITANTS WHILE BOTH ARE ALIVE AND CONTINUES TO MAKE A PAYMENT EQUAL TO 75 PERCENT OF THE ORIGINAL PAYMENT TO THE SURVIVOR AFTER THE FIRST ANNUITANTS DEATH. A 50 PERCENT JOINT AND SURVIVOR ANNUITY PAYS THE SPECIFIED MONTHLY PAYMENT TO THE ANNUITANTS WHILE BOTH ARE ALIVE AND CONTINUES TO MAKE A PAYMENT EQUAL TO 50 PERCENT OF THE ORIGINAL PAYMENT TO THE SURVIVOR AFTER THE FIRST ANNUITANTS DEATH

27
Q

LIFE ANNUITY CONTRACTS

A

PROTECT CLIENTS FROM OUTLIVING THEIR ASSETS BY PROVIDING A SERIES OF PERIODIC PAYMENTS TO THE ANNUITANT, TYPICALLY FOR AS LONG AS THE ANNUITANT LIVES

28
Q

LONGEVITY INSURANCE

A

A SOPHISTICATED NAME FOR A DEFERRED ANNUITY PURCHASED BY AN INDIVIDUAL AT OR BEFORE RETIREMENT THAT WILL NOT BEGIN TO MAKE PAYMENTS UNTIL THAT PERSON REACHES AN ADVANCED AGE

29
Q

MINIMUM INTEREST RATE

A

THE MINIMUM RATE TO BE PAID ON A FIXED ANNUITYS PRINCIPAL BALANCE FOR THE DURATION OF THE ANNUITY CONTRACT

30
Q

NON-QUALIFIED ANNUITIES

A

ANNUITY CONTRACTS PURCHASED WITH FUNDS OUTSIDE OF QUALIFIED RETIREMENT PLANS OR IRAs (for example, from investment accounts or private savings)

31
Q

100% JOINT AND SURVIVOR ANNUITY

A

PAYS THE SURVIVOR 100% OF THE ANNUITY PAYMENT AFTER THE DEATH OF THE FIRST ANNUITANT

32
Q

OWNER

A

PERSON, TRUST, OR COMPANY THAT OWNS THE ANNUITY CONTRACT AND NAMES THE ANNUITANT AND BENEFICIARIES. THE OWNER COULD ALSO BE THE ANNUITANT AND/OR THE BENEFICIARY

33
Q

PARTICIPATION RATE

A

DETERMINES HOW MUCH OF THE INCREASE IN THE INDEX WILL BE USED TO CALCULATE THE INDEX-LINKED INTEREST

34
Q

PARTIES TO ANNUITY CONTRACT

A

THE ANNUITANT, THE BENEFICIARY, THE OWNER, AND THE INSURANCE COMPANY

35
Q

POINT-TO-POINT INDEX-LINKED CREDITING METHOD

A

BASED ON THE DIFFERENCE BETWEEN AN INDEX VALUE AT THE END OF THE TERM COMPARED WITH THE INDEX VALUE AT THE START OF THE TERM

36
Q

POOLING OF RISK

A

THE SPREADING OF RISK AMONG A LARGE NUMBER OF SIMILAR CONTRIBUTORS TO THE POOL. PROTECTION IS PROVIDED TO THE ENTIRE POOL OF CONTRIBUTORS. WITH ANNUITIES, THE RISK THAT IS BEING SPREAD IS THE RISK OF OUTLIVING RETIREMENT FUNDS, OR SUPERANNUATION

37
Q

PROSPECTUS

A

A DISCLOSURE DOCUMENT PROVIDED TO PURCHASERS OF VARIABLE ANNUITIES AND VARIABLE LIFE INSURANCE PRODUCTS THAT CONTAINS IMPORTANT INFORMATION ABOUT THE CONTRACT, INCLUDING FEES AND CHARGES, INVESTMENT OPTIONS AND OBJECTIVES, RISKS, DEATH BENEFITS, LIVING BENEFITS, AND OTHER IMPORTANT INFORMATION

38
Q

QUALIFIED ANNUITIES

A

ANNUITY CONTRACTS PURCHASED WITH FUNDS IN A QUALIFIED RETIREMENT PLAN OR IRA

39
Q

RENEWAL RATE

A

THE INTEREST RATE OFFERED ON A FIXED ANNUITY AFTER THE EXPIRATION OF THE INITIAL RATE

40
Q

RETIREMENT LIFE EXPECTANCY

A

THE PERIOD BETWEEN RETIREMENT AND DEATH

41
Q

RISK-BASED CAPITAL

A

THE INVESTMENT RISK ASSESSMENT UNDERTAKEN BY THE INSURANCE COMPANY IN INVESTING THE MONEY BACKING UP THE ANNUITY POOL

42
Q

SECONDARY MARKET ANNUITIES

A

CALLED PRE-OWNED ANNUITIES OR IN-FORCE ANNUITIES. THESE ANNUITIES CAN BE PURCHASED FROM THE ORIGINAL OWNER AT A DISCOUNT OR FROM A THIRD PARTY, IN WHICH THE STREAM OF INCOME IS ASSIGNED TO THE PURCHASER. THESE TYPICALLY OFFER A RATE OF RETURN OR YIELD THAT IS WELL ABOVE THE YIELD AVAILABLE ON STANDARD FIXED ANNUITIES, IMMEDIATE ANNUITIES, OR EVEN BONDS OF A SIMILAR CREDIT QUALITY.

43
Q

75% JOINT AND SURVIVOR ANNUITY

A

PAYS THE SURVIVOR 75% OF THE ANNUITY PAYMENT AFTER THE DEATH OF THE FIRST ANNUITANT. THE INITIAL ANNUITY PAYMENT WILL BE LARGER THAN WITH A 100% JOINT AND SURVIVOR ANNUITY

44
Q

SINGLE LIFE ANNUITY

A

ALSO KNOWN AS A STRAIGHT LIFE ANNUTIY, PROVIDES A STREAM OF INCOME TO THE ANNUITANT FOR LIFE

45
Q

SINGLE PREMIUM ANNUITY

A

AN ANNUITY PURCHASED WITH A SINGLE LUMP SUM

46
Q

STRAIGHT OR PURE LIFE ANNUITY

A

AN ANNUITY THAT PROVIDES A STREAM OF INCOME TO THE ANNUITANT FOR LIFE

47
Q

SUPERANNUATION

A

THE RISK OF RUNNING OUT OF MONEY BEFORE DEATH DUE TO LONG LIFE AND CAN BE MITIGATED BY USING ANNUITIES

48
Q

TERM CERTAIN ANNUITY

A

ACTS AS A HEDGE AGAINST THE MORTALITY RISK RETAINED WHEN AN INDIVIDUAL PURCHASES A SINGLE LIFE ANNUTIY BY PRESERVING SOME OR ALL OF THE CAPITAL FOR DISTRIBUTION TO THE ANNUITANTS HEIRS, BUT THIS HEDGE COMES AT A COST

49
Q

VARIABLE ANNUITIES

A

PROVIDE CONSUMERS WITH AN OPPORTUNITY TO INDIVIDUALLY TAILOR THE TYPES OF INVESTMENTS BACKING UP THE ANNUITY CONTRACT TO THEIR UNIQUE NEEDS

ChFC HS311 FP:FUNDAMENTALS OF INSURANCE PLANNING (10 decks)

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