Annuities Flashcards
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?
Annuity
What is the main reason for purchasing an annuity?
To provide income that the annuitant cannot outlive
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 annuitization period, then the payments will last 15 years
What are the two types of refund life annuities?
Cash refund and installment refund
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than 1 year after the annuity purchase
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?
Current
How are annuities classified depending on how many lives they cover?
Single life and multiple life annuities
What is the difference between a single premium and a flexible premium payment options in a deferred annuity?
The number of payments that purchase the annuity
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?
Flexible premium deferred annuity
What are the two phases of an annuity?
Accumulation and annuitization (or payin and payout)
Can a business or a corporation be an annuitant?
No an annuitant must always be a natural person
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
What type of annuity can be purchased with a single premium?
Immediate annuity
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
Annuitant’s estate
If the annuitant dies during the accumulation period, who will receive the annuity benefits?
Beneficiary
In flexible premium payment annuities, the term flexible refers to what?
Amount of premium
What are the two classifications of annuities according to the time when annuity payments begin?
Immediate and deferred
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period
Whose life expectancy is taken into consideration in an annuity contract?
Annuitant
How soon can income payments begin in an immediate annuity?
No later than 1 year from the time of annuity purchase
Who bears the investment risk in a fixed annuity?
The insurer
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
Annuitant receives payments from the annuity during the annuitization period
The beneficiary receives benefits after the annuitants death
What are accumulation units in annuities?
Ownership units in separate accounts
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 causes a variable annuity benefit to vary?
The annuity’s underlying investments
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?
Straight life
What type of licenses are required in order to sell variable annuities?
A life insurance license and a securities license
How long is income paid under pure life annuity?
Only for the life of the annuitant
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?
Joint life annuity
Who possesses all the rights in an annuity
Annuity owner
What is a disadvantage of owning a fixed annuity, as opposed to variable?
In times of inflation, the benefit of a fixed annuity will have decreased purchasing power
What type of annuity credits its interest based upon an index such as s&p500?
Equity indexed annuity
Who receives income payments from an annuity?
Annuitant
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 type of annuity requires an agent to have a securities license?
Variable annuity
