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MI Life Insurance Exam > Annuities > Flashcards

Annuities Flashcards

1
Q

Deferred

A

Withheld or postponed until a specified time or event in the future

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2
Q

Life contingency

A

Dependent upon whether or not the insured is alive

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3
Q

Liquidation of an estate

A

Converting a person’s net worth into cash flow

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4
Q

Natural person

A

Human being

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5
Q

Qualified plan

A

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

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6
Q

Suitability

A

A requirement to determine if an insurance product or an investment is appropriate for a particular customer

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7
Q

How do annuities differ from life insurance policies?

A

Aunnities liquid (put money in) to an estate

Life insurance policies create an estate

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8
Q

What is the difference between mortality tables for annuities vs life insurance?

A

Annuities use the table to reflect a longer life expectancy and life insurance policy use them to reflect shorter life expectancy.

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9
Q

The person who purchases the annuity contract and has all the rights such as naming the beneficiary and surrendering the annuity

A

Owner

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10
Q

The person who receives benefits or payments from the annuity, whose life is taken into consideration and for whom the annuity is written.

A

Annuitant

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11
Q

The person who receives annuity assets (either the amount paid into the annuity or the cash value, whichever, is greater) if the annuitant dies duri g the accumulation period, or to whom the balance of annuity benefits is paid out.

A

Beneficiary

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12
Q

AKA: pay-in period
Is the period of time where a person makes payments or premium into the annuity.

A

Accumulation Period

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13
Q

AKA: Annuitization Period, Liquidation period or pay-out

The time during which the sim that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant.

A

Annuity period

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14
Q

Accumulation Period

A

Funds are paid INTO the annuity

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15
Q

Annuity Period

A

Funds are paid OUT to the annuitant

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16
Q

Shorter life expectancy =_________; Longer life expectancy = __________.

A

Higher benefit; lower benefit

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17
Q

The annuitant must be a:

A

Natural person

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18
Q

If an annuitant dies during the accumulation period, the insurer is obligated to return to the beneficiary either:

A

The cash value or the total premiums paid; whichever is greater.

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19
Q

If the beneficiary is not named, the death benefit will be paid to the:

A

Annuitant’s estate

20
Q

Classification of annuities

A
  1. Premium payment method: single premium vs periodic
  2. When income payments begin: immediate vs deferred
  3. How premiums are invested: fixed vs variable
  4. Disposing of proceeds: pure life, annuity certain or life refund annuity
21
Q

Fixed annuities are deposited in the company’s

A

General account

22
Q

Fixed annuities provides

A

Guaranteed minimum rate of interest to be credited to the purchase payments

23
Q

In fixed annuities, the insurer bears the:

A

Investment risk.

24
Q

Fixed annuities that invest on a relatively aggressive basis to aim for higher returns.

A

Index (equity indexed) annuities

25
Q

A single premium deferred annuity that allows the owner to lock in a guaranteed interest rate over a specified maturity period, anywhere between 3 to 10 years.

AKA: modified guaranteed annuity (MGA)

A

Market Value or Market Value Adjusted (MVA)

26
Q

An immediate annuity is purchased with a :

A

Single premium

27
Q

Income payments from a deferred annuity begin sometime after :

A

1 year from the date of purchase

28
Q

At surrender, the owner gets the premium, plus interest (the value of the annuity),

A

Minus the surrender charge

29
Q

Provides the highest monthly benefit, but there is no guarantee that the entire principal will be paid out.

AKA: life-only or straight life

A

Pure life annuity

30
Q

Under this settlement option, if the annuitant dies b4 the principal amount has been paid out, the remainder if the principal amount will be refunded to the beneficiary.

AKA: Refund life

A

Life with Guaranteed Minimum

31
Q

2 types of Refund life annuities

A

Cash Value
Installment Refund

32
Q

When the annuitant dies, the beneficiary receives a lump-sum refund of the principal minus the benefit payments already made to the annuitant.

A

Cash Value

33
Q

When the annuitant dies, the beneficiary will continue to receive guaranteed installments until the entire principal has been paid out.

A

Installment Refund

34
Q

Life Contingency payout option where tha annuity payments are guaranteed for the lifetime of the annuitant, and for a specified time for the beneficiary.

A

Life with period certain

35
Q

Covers one life and annuities payments are made with reference to only one life.

A

Single life annuities

36
Q

Covers two or more lives.

A

Multiple life annuities

37
Q

Payout arrangements where two or more annuitants recieve payments until the first death among the annuitants, and then payments stop.

A

Joint life

38
Q

Guarantees an I come for two recipients that neither can outlive.

A

Joint and survivor

39
Q

Are short term annuities that limit the amounts paid to a certain fixed period or until a certain fixed amount is liquidated.

A

Annuities certain

40
Q

Pays for a specific time only, whether or not the annuitant is living. The annuitant selects the time frame and the insurer selects the amount paid.

A

Fixed period installment option

41
Q

This option pays a specific amount until the funds are exhausted, whether or not the annuitant is living. Annuitant selects amount and insurer selects time frame based on value of account and future earnings.

A

Fixed-amount installments option

42
Q

The main use of annuities is to provide:

A

Retirement income

43
Q

Option where the annuitant can withdraw a maximum percentage of his/her investment annually until the initial investment has been recovered. Protects the annuitant against investment losses.

A

Guaranteed Minimum Withdrawal Benefit (GMWB)

44
Q

Annuities can also be used to accumulate funds for _________ _____.

A

COLLEGE EDUCATION

45
Q

What can provide savings on a tax-deferred basis for education expenses of the annuitant?

A

An annuity

MI Life Insurance Exam (7 decks)

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