Annuities Flashcards
What is a common reason people purchase an annuity?
How to protect against the rest of outliving their financial resources
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?
Variable annuity
The taxable portion of each annuity payment is calculated using which
method?
Exclusion ratio
Kathy’s annuity is currently experiencing tax-deferred growth until she
retires. Which phase is this annuity in?
Accumulation period 
An immediate annuity has been purchased with a single premium. When
does the annuitant typically begin receiving benefit payments?
1 month
Who assumes the investment risk with a fixed annuity contract?
The insurer
If the annuitant dies before the annuity start date,
The premium payments plus interest earned will be given to the beneficiary
Andy the annuitant dies before the annuity start date. Which of the
following is a TRUE statement?
Premiums paid plus interest earned is returned to the beneficiary.
What will the beneficiary receive if an annuitant dies during the
accumulation period?
The greater of the accumulated cash value or the total premium paid
Which type of annuity stops all payments upon the death of the
annuitant?
Life annuity
A savings vehicle designed to first accumulate funds and then
systematically liquidates the funds is called a(n)
Deferred annuity
Which of the following is NOT a feature of equity-indexed annuities?
Offers a Maximo interest rate that increases annually
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
For a minimum of 120 months and a maximum of remainder of her life
Which of these annuities require premium payments that vary from year
to year?
Flexible premium deferred annuity
Which market index is normally associated with an indexed annuity’s rate
of return?
S&P 500
Which annuity payout option allows the policyowner to choose a pre-
determined number of benefit payments?
Period certain
The systematic liquidation of a sum of money is provided by a(n)
Annuity
Which of the following is considered to be the period when the
accumulated value in an annuity is paid out?
Annuitization phase
An annuitant is guaranteed to NOT outlive their benefits with a(n)
Guaranteed lifetime withdrawal benefit
When does an immediate annuity begin making payments?
After the first premium has been paid
Lisa has recently bought a fixed annuity. Which of these is considered to
be a disadvantage of owning this type of annuity?
Doing periods of inflation, a nuance will experience and decrease in purchasing power of their payments
Under a non-qualified annuity, interest is taxed after the
Exclusion ratio has been calculated
Which of these will have the highest monthly payout upon annuitization?
Straight life
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?
Refund annuity
An annuity which is backed by a life insurer’s separate account is called
Variable annuity
What kind of annuity pays income to two annuitants until their deaths?
Joint and survivor annuity
How soon can the benefit payments begin with a deferred annuity?
A minimum of 12 months after date of purchase
How do interest earnings accumulate in a deferred annuity?
On a tax deferred basis
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?
60 payments
Which of these is NOT considered to be a purpose of an annuity?
Annuities are intended to create an estate
Maria would like an annuity that provides a guaranteed accumulation or
payout. The type of annuity she is seeking is called
Annuity certain
Which of these statements regarding the annuitant is CORRECT?
An annuity life expectancy determines the annuity payments
What happens to interest earned if the annuitant dies before the payout
start date?
It is taxable
During the accumulation period, who can surrender an annuity?
The policy owner
Fixed annuities provide each of the following EXCEPT
Hedge against inflation
What is the primary reason for buying an annuity?
Provide future economic security
An annuitant would like to determine the amount of an annuity
distribution that is exempt from taxation. What is used to calculate this?
Exclusions ratio
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?
Temporary annuity certain
What is the nonforfeiture value of an annuity before annuitization?
All premiums paid, plus interest, mine is any withdrawal and surrender charges
Which of the following annuity payout options makes no additional
payments regardless of when the annuitant dies?
Life only
How are annuities given favorable tax treatment?
Gains are taxed at distribution
Fixed period settlement options are considered to be a form of a(n)
Annuity
Which settlement option pays a stated amount to an annuitant, but no
residua) value to a beneficiary?
Life income
An annuity is primarily used to provide
Retirement income
Phil is shopping for an annuity that guarantees he CANNOT outlive the
benefits. Which of these benefit options would he choose?
Guaranteed lifetime withdrawal benefits
What distinguishes a deferred annuity from an immediate annuity?
The time at which benefit payments start.
Which of the following is an annuity that is linked to a market-related
Equity-indexed annuity
Which type of annuity guarantees a stated number of income payments,
whether or not the annuitant is still alive to receive them?
Life annuity certain
Simon has purchased a fixed immediate annuity. His payment amount
will be dependent upon principal, interest, and the contract’s
Income period
