Chapter 5 - Annuities Flashcards
What are the premium payment options for annuities? (2)
- Single-Premium
- Flexible-Premium (as much as you want at any time)
When do the income payments for an immediate annuity start?
Within 1 year of your paying your lump-sum premium
What is the purpose of an annuity’s surrender charge? How is it administered?
- It compensates the company for loss of the investment value due to an early surrender of a deferred annuity.
- It is levied against cash value
- It is a percentage that reduces over time.
What is the typical length of an annuity surrender charge?
7 years
For Certain Annuities what can be fixed? (2)
- The period
- The amount paid out
What are the features of an Equity Index Annuity? (4)
- It is a fixed annuity - less risky than variable annuities or mutual funds
- Guaranteed minimum interest rate
- Current rate of return is based on an index of equity products
- It mirror’s an equity index
What are some uses of an annuity? (4)
- Lump-Sum Settlements
- Qualified Retirement Plans
- Retirement Income
- Education Funds
What are the settlement options for annuities? (7)
- Life Only
- Refund Life Annuity (Refund the rest of money they would have paid if you had lived until your life expectancy. Lowest payout of the three life expectancy options)
- Life with Period Certain
- Joint Life (Benefit gets paid out on life of first to die)
- Joint and Survivor (pays through the second death)
- Lump-Sum (could be a big tax bill at ordinary income rate)
- Fixed Period/Fixed Amount
The “Annuitization period” is the time during which accumulated money is converted into an income stream. It is also referred to as what? (3)
- Annuity Period
- Liquidation Period
- Pay-out Period
If an annuity owner dies while the annuity is still in the accumulation stage what will the beneficiary receive?
The greater of the money paid into the annuity or the cash value.
What is the difference between who can be an annuity owner and the annuitant?
Owners can be individuals or entities but the annuitant must be a natural person, whose life expectancy is taken into consideration for the annuity.
