Annuities Flashcards
Annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is what type?
Flexible premium deferred
If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the owner receive?
Current
Main reason for purchasing an annuity?
To provide income that the annuitant cannot outlive
2 classifications of annuities according to the time when annuity payments begin
Immediate and deferred
Who bears the investment risk in a fixed annuity?
The insurer
Type of annuity can be purchased with single premium
Immediate
Annuity for someone who wants the benefit option that will pay the largest amount only for as long as the annuitant lives?
Straight life
Annuity settlement option provides income payments to the annuitant for the duration of his or her life and ceases at the annuitants death?
Pure life
In an annuity the accumulated money is converted into a stream of income during which phase?
Annuitization period
Licenses you need to sell annuities?
Life insurance and securities
How long will a life annuity with a 15 year period certain pay?
For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period, then the payments will last for 15 years
How soon can payments begin in an immediate annuity?
No later than 1 year from the time of the annuity purchase
If the annuitant dies before the annuitization period starts, what will the beneficiary receive?
Either the amount paid into the annuity or the cash value, whichever is greater
How long is a pure life annuity paid out?
Only for the life of the annuitant
Disadvantage of owning a fixed annuity as opposed to variable
During inflation, the benefit of a fixed annuity will have decreased purchasing power
In flexible premium payment annuities, the term flexible refers to what?
Amount of premium
How are annuities classified depending on how many lives they cover?
Single life and multiple life
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than one year after the purchase
Diff between single premium and flexible premium payment options in a deferred annuity?
The number of payments that purchase the annuity
Can a business or a corporation be an annuitant?
No, an annuitant must be a natural person
What are the two types of refund life annuities?
Cash refund and installment refund
What is the diff between annuitant and beneficiary?
The beneficiary receives benefits after the annuitants death
Settlement option provides income to the annuitant for their life, and also guarantees payment for a specified number of years
Life income with period certain
Who posses all the rights in an annuity?
Annuity owner
What are accumulation units in annuities?
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
Annuity tables are different than mortality tables why
Since there is no insurance protection
Insurers take $ from people who die quickly and
Pay to those who live much longer
If an annuitant owner dies before annuitization period, the $ is paid to the beneficiary and they pay taxes on what
interest earned
Rights of ownership on an annuity become effective when
As of the contract date
When can you surrender a deferred annuity for cash?
during the accumulation period
Who is responsible for paying the premium in an annuity
The policyowner
When a policy owner surrenders the policy for cash they have exercised what
Nonforfieture option
Surrender charge on an annuity is sometimes called what
Back end load
Annuities waive surrender charges for what
Death and disability
Death benefit on an annuity during the accumulation period is equal to what
Its cash value
If the owner of a life income annuity with 10 year period certain dies after 13 years what does the beneficiary receive?
Nothing
Does a life income annuity have a beneficiary?
No it is the riskiest choice
On a joint life annuity when do payments stop?
At the death of the first annuitant
Annuity with least amount of risk
Refund annuity
Can you exchange an annuity for life insurance?
No but you can for another annuity under sec 1035
Fixed annuities are backed by what
Insurers general account
Fixed annuities
Guarantee a fixed return and are backed by the state guaranty association
Equity indexed annuity
Rate of return based on a index of equity products
Do equity indexed annuity’s have much purchasing power risk?
No because they’re linked to an index
Employers can use annuities to fund a deferred compensation plan
But not a corporate pension plan
Lottery payouts and structured settlements are usually funded by what
Annuities
Most immediate annuities are purchased by whom
Those who wish to supplement their retirement income
When recommending a variable annuity you should inquire about what
Applicants tax status
