Annuities Flashcards
Which type of contract liquidates an estate through recurrent payments?
Annuity
P, age 50, purchased an annuity that P will fund with $500/ month for 15 years. The annuity will then pay P retirement payments after the 15 years. Which type of annuity did P purchase?
Deferred
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which of the following annuities?
Flexible Installment Deferred
What protects against the risk of living too long?
Annuities
• Simply stated, an annuity is started with a _____ ___ of money that will be paid out in
installments over a period of time or until the money is all gone
large sum
Principle amount, rate of interest the annuity earns, and length of payout period determine what?
monthly amount of benefit
Contract owner
-The individual who purchases the annuity pays the premiums and has rights of
ownership.
-can be annuitant, the beneficiary, or neither
The income benefits distributed at regular intervals during the liquidation phase of an
annuity contract are normally payable to the _______.
Annuitant
Beneficiary
The beneficiary is the person who receives survivor benefits upon the annuitant’s death.
The pay‐in period, where the contract owner makes the purchase payments and the period of an annuity normally may continue after the purchase
payments cease.
Accumulation Period
Annuity Period
- liquidation period
- annuitization period
- payout period
- money that has accrued during the accumulation period is paid-out in the form of payments to the annuitant.
Single Payment=?
lump sum
Installments paid over a period of time=
Periodic Payments
Immediate Annuities
- lump sum payment
- payments 30 days from purchase
- ex. insurance settlements, lottery winnings….
- SPIA
-pays out a fixed amount for life starting at a future date
Deferred Annuities
pays the annuitant a guaranteed income for the annuitant’s lifetime
Straight Life Income Payout Option
straight to owner only
Cash Refund Payout Option
Pays>annuitant for life>dies>before all the money is gone> lump-sum cash payment>remaining funds>beneficiary
Installment Refund Payout Option
Annuitant for life
beneficiary in installments until money is gone
It provides that benefit payments will continue for a minimum number of years regardless of when the
annuitant dies.
Life with Period Certain Payout Option (life income with term certain)
Joint and Full Survivor Payout Option
Pays out the annuity to two or more people until the last annuitant dies
Joint and two-thirds survivor
Survivor will have payments reduced to two-thirds of the original
payment.
Survivor will have payments reduced to one-half of the original
payment.
Joint and one-half survivor
Pays guaranteed income payments for a certain period of time, such as
10 or 20 years, whether or not the annuitant is living.
Period Certain Payout Option
