ANNUITIES CONTRACT (Chapter 7) Flashcards
CHAPTER 7 - Annuity Contract
TRUE OR FALSE?
When an annuity contract has been issued it is final; no changes can be made except to change the person named as beneficiary.
TRUE
The investor has two general requirements for both the payout and accumulation annuity contract, what are they?
- To assist the agent by providing all required information for the application form to be completed;
- To fund the contract.
FILL IN THE BLANK!
The annuity application form is completed by ____________.
by the agent and
investor together, whether virtually or in person.
FILL IN THE BLANK!
As with the application for a segregated fund, a _____________ is prepared and reviewed with the client when the application is submitted
a reason-why letter
TRUE OR FALSE?
A reason-why letter substantiates the reasons why the annuity is suitable for the client’s needs.
TRUE
TRUE OR FALSE?
The contract owner and annuitant can be the different people when the annuity is registered.
FALSE
The contract owner and annuitant must be the same person when the annuity is registered.
[Ref. 7.2.1.1]
A registered annuity contract is subject to all rules set by the Income Tax Act (ITA) for registered accounts which include…
- The age at which income may be paid from the account;
- Requirement for a minimum withdrawal;
- Withholding tax on withdrawals;
- What happens to the account if the account owner dies.
TRUE OR FALSE?
A non-registered account can be subject to Canada Revenue Agency (CRA) rules for contributions, withdrawals, or tax deferral.
FALSE
A non-registered account is not subject to Canada Revenue Agency (CRA) rules for contributions, withdrawals, or tax deferral; however, it is subject to the rules set by the insurer issuing the contract.
[Ref. 7.2.1.1]
Identification requirements for the owner of a segregated fund and annuity contract is required. There are two exceptions to identification requirements on annuity. What are they?
- An immediate or deferred annuity is funded by a transfer from a registered pension plan or proceeds of a group life insurance policy;
- The contract is registered.
TRUE OR FALSE?
The owner of an annuity contract must also provide evidence of the age of each annuitant
TRUE
- If the owner is a legal entity, its identity must be confirmed by specific documentation.
TRUE OR FALSE?
In regards to funding an annuity contract, sources of funds include direct deposits from accounts and transfers made from both registered and non-registered savings accounts. (whether true or false, name at least four)
TRUE
Some Examples are;
- Personal savings or chequing account;
- Bonds;
- Guaranteed Investment Certificates (GICs);
- Tax-free savings accounts (TFSAs);
- Stocks, mutual funds, and segregated funds.
- Registered retirement savings plan (RRSP);
- Registered pension plan (RPP) contributions to a defined contribution pension plan (DCPP) or
recognized participation amount from a defined benefit pension plan (DBPP); - Registered retirement income fund (RRIF);
- Locked-in retirement account (LIRA);
- Life income fund (LIF) or locked-in retirement income fund (LRIF);
- Deferred profit-sharing plan (DPSP);
- Prescribed retirement income fund (PRIF);
- Restricted life income fund (RLIF).
[Ref. 7.2.2]
TRUE OR FALSE?
Annuity contracts have to be delivered in person by the agent not by mail
FALSE
Contracts are not necessarily delivered in person by the agent.
An insurer may mail or courier the contract to its owner. However, when it is possible and safe for the agent to deliver the contract, he then has a chance to once more reinforce the value of the product purchased and answer any further questions.
[Ref. 7.3.1]
In regards to annuity contract claims, who makes a death claim in annuity contracts when an annuitant dies?
It is usually mostly the beneficiary and sometimes surviving annuitant (spouse, common law). There are no claims for annuity contracts that have no guarantee.
[Ref. 7.4.2.1]
TRUE OR FALSE?
If the primary beneficiary has died prior to the annuitant, a contingent beneficiary may receive proceeds.
If no living beneficiary exists, the claim is then made by the executor of the estate of the annuitant and paid to the successor policyholder.
FALSE
If the primary beneficiary has died prior to the annuitant, a contingent beneficiary may receive proceeds. If no living beneficiary exists, the claim is then made by the executor of the estate of the annuitant and paid to the estate of the annuitant.
[Ref. 7.4.2.1]
TRUE OR FALSE?
When the accumulation annuity is cashed in prior to its maturity date, a market value adjustment (MVA) may be made by the insurer, which penalizes the contract owner by reducing the sum he receives.
TRUE
