Annuities Flashcards
An ________ protects individuals against outliving their money.
Annuity
______________ indicate the number of individuals within a specified group (ie. Male, female, smoker, non) starting at a certain age who are expected to be alive day a succeeding age.
Mortality tables
The person who receives benefits or payments from an annuity.
Annuitant
Annuities are based off the life expectancy of whom.
The annuitant
The annuitant must be a _____________, regardless of who owns the policy.
Natural person
The purchaser of the annuity contract but not necessarily the one who receives benefits. May be a Corp, trust, or other legal entity.
Owner
Know as the pay in period. Period of time owner makes tax deferred payments (premiums) into an annuity.
Accumulation period
Time in which the sun accumulated is converted to a stream of income payments to annuitant.
Annuity period (also known as annuitization period, liquidation period, or pay-out period)
The time when the annuity benefit payouts begin.
Annuatization date
Shorter life expectancy = _______ benefit
Longer life expectancy = _________ benefit
Higher; lower
If an annuitant dies during the accumulation period, the insurer is obligated to return to the __________ either the cash value or total premiums paid.
Beneficiary
The two premium payment methods for annuities.
Single premium vs periodic
The two classifications of how annuity premiums are invested.
Fixed vs. variable
The three classifications for the disposing of annuity proceeds. (Pal)
Pure life, annuity certain, life refund annuity
An ________ annuity is purchased with a single premium.
Immediate
The income payments from a deferred annuity begin sometime after _________ from the date of purchase.
1 year
Stipulates that a deferred annuity must have a guaranteed surrender value that is available if the owner decides to surrender the annuity prior to annuitizarion.
Nonforfeiture law
Helps compensate the company for loss of investment value due to an early surrender of a deferred annuity.
Surrender charges
At surrender the owner gets the ______ + __________, minus the surrender charge.
Premium + interest
Annuity contracts provide for a waiver of surrender charges if the annuitant is _____________ for at least 30 days.
Long term care
Allows one to surrender contract without charge in the event interest rates drop to a specified amount within a specified time frame.
Bail out provision
- guaranteed minimum rate of interest
- income payments do not vary
- guaranteed dollar amount and length of period of payment determined by the settlement option chowed. Y annuitant
Fixed annutiies
In __________ annuities the premiums are deposited into the insurance company’s general account
Fixed
annuity that is invested on a more aggressive basis and is tied to stock investment rates.
Indexed annuities
During accumulation the insurer will give the annuitant a guaranteed interest rate based on a ________ rate as specified, or the __________ interest rate, whichever is higher.
Minimum, current
Annuity that:
- separate account
- no guarantees interest rate
- a security; securities license required
Variable annuity
Variable premiums purchase ___________ units, which is similar to buying shares ina. Mutual fund.
Accumulation
Provides higher monthly benefit but ceases upon death.
Pure life
Pays a specific amount for remainder of life; remainder of principal at death goes to beneficiary.
Life with guaranteed minimum
Provides the highest monthly benefit but no guarantee that the entire principal will be paid out.
Pure life annuity
When the annuitant dies, beneficiary receives a lump sum of principal minus benefit payments already made.
Cash refund
Cash refund does or does not guarantee to pay any interest?
Does not
When annuitant dies the beneficiary continues to receive guaranteed installments until the entire principal amount has been paid out
Installment refund
Any unpaid annuity benefits following the death of an annuitant are or are not taxable to the beneficiary?
Are
Annuity payments are guaranteed for the life of the annuitant and for a specified time for the beneficiary.
Life with period certain
Cover one life and annuity payments are made with reference to one life only.
Single life
Cover 2 or more lives
Multiple life
A payout arrangement where 2 or more annuitants receive payments until the first death among them then payments stop.
Joint life
Life income option that guarantees income for two recipients for life. Usually a lower payout after first death. No guarantee that all proceeds will be paid out of both beneficiaries die shortly after installments begin.
Joint and survivor
Short term annuities that limit the amounts paid to a certain fixed period
Annuities certain
Pays for a specified time only, whether or not the annuitant is living
Fixed period
Annuitant selects amount for each payment, insurance company determines how long. Pays until funds are exhausted or upon death remaining funds go to beneficiary
Fixed amount
The main use of annuities is to provide for what?
Retirement incime
Option for the annuitant to withdraw max percentages of their investment annually until the initial investment has been em recovered.
Guaranteed minimum withdrawal benefit (gmwb)
With a lump sum settlement all interest accumulated is _________. Additional __% penalty can be imposed prior to annuitants reaching age ____
Taxable; 10%; 59 1/2
How long will a life annuity with a 15-year period certain pay?
For the life of the annuitant unless they die within the first 15 years of the annuitizarion period; then the payments will last for 15 years.
What type of annuity is suitable for someone who wants to select the benefit option thay will pay the largest amount only as long as the annuitant lives?
Straight life
If the annuitant dies before the annuitization period starts, what will the beneficiary receive?
Either the amount paid into the annuitu or the cash value, whichever is greater.
How long is income paid under a pure life annuity?
Only for the life of the annuitant
In flexible premium payment annuities, the term flexible refers to what?
Amount of premium
What are accumulation units in annuities?
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?
Life income with period certain
What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the annuitant’s death?
Pure life
What happens if a deferred annuity is surrendered before the annuatization period?
The owner will receive the surrender value of the annuity.
Who can surrender a deferred annuity contract?
Only the annuity owner
T/F: death benefits are findable by annuities.
False
T/F: estate liquidation is not fundable by annuities.
False
Creating an estate is or is not an appropriate use of a deferred annuity.
Is NOT. Unlike life insurance they liquidate it. Not create it
Annuities are taxed as income, NOT ________________
Capital gains
Exceptions to the 59 1/2 rule.
Total disability
Catastrauphic medical expenses
Down payment on FURST home up to 10k
Post secondary education.
Even though the death benefit in a life policy is paid to the beneficiary tax free it may be included in the taxable estate at death in what situations?
- Incidents of ownership -
- Estate as beneficiary
- Transfer of ownership within 3 years of death
Annuitant must be a _______, owner can be a _______
Natural person, corp
