Annuities

Question 1

What is a common reason people purchase an annuity?

Answer 1

How to protect against the rest of outliving their financial resources

Question 2

An annuitant would like to determine the current value of her annuity,
do this, she multiplies the number of “accumulation units” she owns
times the unit value of the “separate account”. What kind of annuity BEST
matches this description?

Answer 2

Variable annuity

Question 3

The taxable portion of each annuity payment is calculated using which
method?

Answer 3

Exclusion ratio

Question 4

Kathy’s annuity is currently experiencing tax-deferred growth until she
retires. Which phase is this annuity in?

Answer 4

Accumulation period 

Question 5

An immediate annuity has been purchased with a single premium. When
does the annuitant typically begin receiving benefit payments?

Answer 5

1 month

Question 6

Who assumes the investment risk with a fixed annuity contract?

Answer 6

The insurer

Question 7

If the annuitant dies before the annuity start date,

Answer 7

The premium payments plus interest earned will be given to the beneficiary

Question 8

Andy the annuitant dies before the annuity start date. Which of the
following is a TRUE statement?

Answer 8

Premiums paid plus interest earned is returned to the beneficiary.

Question 9

What will the beneficiary receive if an annuitant dies during the
accumulation period?

Answer 9

The greater of the accumulated cash value or the total premium paid

Question 10

Which type of annuity stops all payments upon the death of the
annuitant?

Answer 10

Life annuity

Question 11

A savings vehicle designed to first accumulate funds and then
systematically liquidates the funds is called a(n)

Answer 11

Deferred annuity

Question 12

Which of the following is NOT a feature of equity-indexed annuities?

Answer 12

Offers a Maximo interest rate that increases annually

Question 13

Victoria owns a life annuity and elects to receive annuity payments
monthly for the remainder of her life with “ten years certain”. Her annuity
will make payments

Answer 13

For a minimum of 120 months and a maximum of remainder of her life

Question 14

Which of these annuities require premium payments that vary from year
to year?

Answer 14

Flexible premium deferred annuity

Question 15

Which market index is normally associated with an indexed annuity’s rate
of return?

Answer 15

S&P 500

Question 16

Which annuity payout option allows the policyowner to choose a pre-
determined number of benefit payments?

Answer 16

Period certain

Question 17

The systematic liquidation of a sum of money is provided by a(n)

Answer 17

Annuity

Question 18

Which of the following is considered to be the period when the
accumulated value in an annuity is paid out?

Answer 18

Annuitization phase

Question 19

An annuitant is guaranteed to NOT outlive their benefits with a(n)

Answer 19

Guaranteed lifetime withdrawal benefit

Question 20

When does an immediate annuity begin making payments?

Answer 20

After the first premium has been paid

Question 21

Lisa has recently bought a fixed annuity. Which of these is considered to
be a disadvantage of owning this type of annuity?

Answer 21

Doing periods of inflation, a nuance will experience and decrease in purchasing power of their payments

Question 22

Under a non-qualified annuity, interest is taxed after the

Answer 22

Exclusion ratio has been calculated

Question 23

Which of these will have the highest monthly payout upon annuitization?

Answer 23

Straight life

Question 24

An annuitant dies during the distribution period. What kind of annuity
will return to a beneficiary the difference between the annuity value and
the income payments already made?

Answer 24

Refund annuity

Question 25

An annuity which is backed by a life insurer's separate account is called

Answer 25

Variable annuity

Question 26

What kind of annuity pays income to two annuitants until their deaths?

Answer 26

Joint and survivor annuity

Question 27

How soon can the benefit payments begin with a deferred annuity?

Answer 27

A minimum of 12 months after date of purchase

Question 28

How do interest earnings accumulate in a deferred annuity?

Answer 28

On a tax deferred basis

Question 29

Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary?

Answer 29

60 payments

Question 30

Which of these is NOT considered to be a purpose of an annuity?

Answer 30

Annuities are intended to create an estate

Question 31

Maria would like an annuity that provides a guaranteed accumulation or payout. The type of annuity she is seeking is called

Answer 31

Annuity certain

Question 32

Which of these statements regarding the annuitant is CORRECT?

Answer 32

An annuity life expectancy determines the annuity payments

Question 33

What happens to interest earned if the annuitant dies before the payout start date?

Answer 33

It is taxable

Question 34

During the accumulation period, who can surrender an annuity?

Answer 34

The policy owner

Question 35

Fixed annuities provide each of the following EXCEPT

Answer 35

Hedge against inflation

Question 36

What is the primary reason for buying an annuity?

Answer 36

Provide future economic security

Question 37

An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this?

Answer 37

Exclusions ratio

Question 38

Kristi purchases an annuity that will pay her husband an income for 15 years, If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?

Answer 38

Temporary annuity certain

Question 39

What is the nonforfeiture value of an annuity before annuitization?

Answer 39

All premiums paid, plus interest, mine is any withdrawal and surrender charges

Question 40

Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?

Answer 40

Life only

Question 41

How are annuities given favorable tax treatment?

Answer 41

Gains are taxed at distribution

Question 42

Fixed period settlement options are considered to be a form of a(n)

Answer 42

Annuity

Question 43

Which settlement option pays a stated amount to an annuitant, but no residua) value to a beneficiary?

Answer 43

Life income

Question 44

An annuity is primarily used to provide

Answer 44

Retirement income

Question 45

Phil is shopping for an annuity that guarantees he CANNOT outlive the benefits. Which of these benefit options would he choose?

Answer 45

Guaranteed lifetime withdrawal benefits

Question 46

What distinguishes a deferred annuity from an immediate annuity?

Answer 46

The time at which benefit payments start.

Question 47

Which of the following is an annuity that is linked to a market-related

Answer 47

Equity-indexed annuity

Question 48

Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?

Answer 48

Life annuity certain

Question 49

Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon principal, interest, and the contract's

Answer 49

Income period