CH 5 Annuities Flashcards
What is the difference between a single premium and a flexible premium payment option 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 is the main reason for purchasing an annuity?
To provide income that the annuitant cannot outlive.
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 are the two types of refund life annuities?
Cash refund and installment refund.
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.
In an annuity, the accumulated money is converted into a stream of income during which phase?
Annuitization period.
With a single premium deferred annuity, when will the annuity payments become available?
No sooner than 1 year after the annuity purchase.
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.
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.
Who receives income payments from an annuity?
Annuitant.
What causes a variable annuity benefit to vary?
The annuity;s underlying investments.
How are annuities classified depending on how many lives they cover?
Single life and multiple life annuities.
In flexible premium payment annuities, the term “flexible” refers to what?
Amount of premium.
Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?
The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant’s death.
What type of annuity can be purchased with a single premium?
Immediate annuity.
How soon can income payments begin in an immediate annuity?
No later than 1 year from the time of annuity purchased.
What are the two phases of annuity?
Accumulation and annuitization
pay-in and pay-out
What type of annuity credits its interest based upon an index such as S&P 500?
Equity indexed annuity
How long is income paid under a pure life annuity?
Only for the life of the annuitant.
If the annuitant dies during the accumulation, who will receive the annuity benefits?
Beneficiary.
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 license(s) is/are required in order to sell variable annuities?
Life insurance license and securities license.
What are the two classifications of annuities according to the time when annuity payments begin?
Immediate and deferred.
What are accumulation units in annuities?
Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)
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.
Who bears the investment risk in a fixed annuity?
The insurer.
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.
What annuity settlement option provides income payments to the annuitant for the duration of his/her life, and ceases at the annuitant’s death?
Pure life.
If an annuity provides a set amount of income for two or more persons with the income ceasing ipon the first death, what type of annuity is that?
Joint life annuity.
Can a business or a corporation be an annuitant?
No, an annuitant must always be a natural person.
Whose life expectancy is taken into consideration in an annuity contract?
Annuitant.
If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?
Annuitants estate.
Who possesses all the rights in an annuity?
Annuity owner.
What type of annuity requires an agent to have a securities license?
Variable annuity.
TERM: Deffered
Withheld or postponed until a specified time or event in the future.
TERM: IRS
Internal Revenue Service: a U.S. Government agency responsible for collecting of taxes, and enforcement of the internal revenue code.
TERM: Life Contingency
Dependent upon whether or not the insured is alive.
TERM: Liquidation of an Estate
Converting a person’s net with into a cash flow.
TERM: Natural Person
A human being
TERM: Qualified Plan
A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.
TERM: Suitability
A requirement to determine if an insurance product or an investment is appropriate for a particular customer.
