Annuities

Question 1

An individual has a contract that will provide him with a certain amount of income for the rest of his life. However this is not a life insurance policy. What type of contract does this person have?

Answer 1

Annuity

Question 2

What is the main reason for purchasing an annuity?

Answer 2

To provide income that the annuitant cannot outlive

Question 3

How long will a life annuity with a 15 year period certain pay?

Answer 3

For the life of the annuitant unless he/she dies within the first 15 years of annuitization period, then the payments will last 15 years

Question 4

What are the two types of refund life annuities?

Answer 4

Cash refund and installment refund

Question 5

With a single premium deferred annuity, when will the annuity payments become available?

Answer 5

No sooner than 1 year after the annuity purchase

Question 6

If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?

Answer 6

Current

Question 7

How are annuities classified depending on how many lives they cover?

Answer 7

Single life and multiple life annuities

Question 8

What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

Answer 8

The number of payments that purchase the annuity

Question 9

An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?

Answer 9

Flexible premium deferred annuity

Question 10

What are the two phases of an annuity?

Answer 10

Accumulation and annuitization (or payin and payout)

Question 11

Can a business or a corporation be an annuitant?

Answer 11

No an annuitant must always be a natural person

Question 12

If the annuitant dies before the annuitization period starts, what will the beneficiary receive?

Answer 12

Either the amount paid into the annuity or the cash value, whichever is greater

Question 13

What type of annuity can be purchased with a single premium?

Answer 13

Immediate annuity

Question 14

If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

Answer 14

Annuitant’s estate

Question 15

If the annuitant dies during the accumulation period, who will receive the annuity benefits?

Answer 15

Beneficiary

Question 16

In flexible premium payment annuities, the term flexible refers to what?

Answer 16

Amount of premium

Question 17

What are the two classifications of annuities according to the time when annuity payments begin?

Answer 17

Immediate and deferred

Question 18

In an annuity, the accumulated money is converted into a stream of income during which phase?

Answer 18

Annuitization period

Question 19

Whose life expectancy is taken into consideration in an annuity contract?

Answer 19

Annuitant

Question 20

How soon can income payments begin in an immediate annuity?

Answer 20

No later than 1 year from the time of annuity purchase

Question 21

Who bears the investment risk in a fixed annuity?

Answer 21

The insurer

Question 22

Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?

Answer 22

Annuitant receives payments from the annuity during the annuitization period

The beneficiary receives benefits after the annuitants death

Question 23

What are accumulation units in annuities?

Answer 23

Ownership units in separate accounts

Instead of buying shares, annuity holder purchases accumulation units

Question 24

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?

Answer 24

Life income with period certain

Question 25

What causes a variable annuity benefit to vary?

Answer 25

The annuity’s underlying investments

Question 26

What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

Answer 26

Straight life

Question 27

What type of licenses are required in order to sell variable annuities?

Answer 27

A life insurance license and a securities license

Question 28

How long is income paid under pure life annuity?

Answer 28

Only for the life of the annuitant

Question 29

If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?

Answer 29

Joint life annuity

Question 30

Who possesses all the rights in an annuity

Answer 30

Annuity owner

Question 31

What is a disadvantage of owning a fixed annuity, as opposed to variable?

Answer 31

In times of inflation, the benefit of a fixed annuity will have decreased purchasing power

Question 32

What type of annuity credits its interest based upon an index such as s&p500?

Answer 32

Equity indexed annuity

Question 33

Who receives income payments from an annuity?

Answer 33

Annuitant

Question 34

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?

Answer 34

Pure life

Question 35

What type of annuity requires an agent to have a securities license?

Answer 35

Variable annuity