Chapter 7 Flashcards
The contribution phase of an annuity is called the ____________ phase.
Accumulation
Identify the acronym: SPDA
Single Premium Deferred Annuity
What licenses are required for an agent to sell variable annuities or variable life?
Both a life insurance license and FINRA Series 6 or 7 license is required
Identify the acronym: SPA
Single Premium Annuity
Which annuity payout would have the lower monthly income benefit a 10- or 20-pay with period certain?
The 20-pay period certain would have a lower payment since the guarantee is longer
Which type of annuity would most likely be considered a security — fixed or variable?
A variable annuity
At annuitization (payout), accumulation units are exchanged for __________ units.
Annuity
An annuitant with a straight life annuity dies after 9 years. How many years of benefit will his beneficiary receive?
$0. Straight life payments cease in the death of the annuitant.
What benefit does the installment refund option on an annuity certain payout allow the beneficiary?
To continue to receive the remainder of the monthly income benefits
What modification is made to the straight life payout option to guarantee payments for a minimum number of years?
Attaching a period certain to a payout
An immediate annuity must begin making income payments within ____ days of the initial deposit.
30
What is another name for annuity surrender charge?
Back end loads
Annuity withdrawals prior to age 59 1/2 will be subject to a _____% IRS penalty plus _______________ of earnings.
10%; federal taxation
An annuitant with a 20-year certain annuity dies after 7 years, how many years of benefits will a beneficiary receive?
The beneficiary will receive the remaining 13 of the 20 years.
What is the purpose of an annuity?
To provide an income that the annuitant cannot outlive
What annuity provides a monthly income that varies depending on market performance?
A variable annuity
Interest earned with a deferred annuity grows on a __________ basis.
Tax deferred
Describe a flexible premium deferred annuity.
Flexible payments (subject to monthly minimum), with tax-deferred growth until later withdrawn
Which annuity provides a fixed, guaranteed minimum rate of return?
A fixed annuity
A flexible premium annuity usually requires a __________ monthly contribution.
Minimum
What is the annuity nonforfeiture value?
The value of an annuity minus any surrender fees
Annuity premiums may be paid as a ___________, or on a __________ basis.
Lump sum; periodic
T/F: An annuity contract uses different mortality tables than a life insurance policy.
T
The annuity benefit of a woman would be ______ than a man’s because a woman is expected to ___________.
Less; live longer
What is the benefit of the Straight-Life payout option to the annuitant?
It provides the highest monthly income
What account is used for the placement of an insurance company’s variable contract assets?
A separate account
T/F: A flexible premium deferred annuity is designed for future income.
T
The cash refund option of an annuity certain payout provides the beneficiary a __________ refund of remaining benefits.
Lump sum
What type of annuity provides a predetermined income for life?
A fixed annuity
What type of annuity has no accumulation period?
A lump sum or single premium annuity
T/F: Joint and last survivor payouts will cease after the first annuitant dies.
F; the joint and last survivor payouts continue payment until the last surviving annuitants dies
T/F: An annuity with a 20-pay certain annuity payout guarantees at least 20 years of payments will occur.
T; at least 20 years of payment are guaranteed to the annuitant, the beneficiary, or both
Which annuity provides a guaranteed return — fixed or variable?
Fixed annuities
An annuity is designed to protect a person against _________ his income.
Outliving
Inflation risk would be a concern for an owner of a _________ annuity.
Fixed
What is the risk of the straight life annuity payout option?
There is no beneficiary after the annuitants death
Traditional contract assets are placed in the insurance company’s __________ account.
General
Annuitization is described as the _________________ of an estate or pool of money.
Systematic liquidation
What type of annuity is designed to pay income at a later date?
A deferred annuity
What annuity’s growth is dependent on the performance of securities in a separate account?
A variable annuity
Interest earned within an annuity grows ____________.
Tax deferred
All variable contract assets are placed in the insurance company’s ___________ account.
Separate
Currently, ___________ companies are the only type of company that may sell annuities.
Insurance
Withdrawals from an annuity may not take place prior to age ______ without penalty.
59 1/2
What payout option provides payments for the annuitants whole life, but will cease at death?
The straight life payout option
A single premium annuity may also be called a __________ annuity.
Lump sum
Which annuity allows for stock market appreciation with guaranteed downside protection?
An equity indexed annuity
The ___________ rate is the percentage of the gain kept by an insurer, based on the overall return of an index.
Participation
If an annuity owner does during the accumulation phase, what would the beneficiary be entitled to receive?
The higher of the total contributions or contract value on the date of death
T/F: the annuity owner and the annuitant do not need to be the same person.
T; the annuity can be purchased for someone other than the owner
The payout phase of an annuity may also be referred to as the ___________ phase.
Annuity
What is another name for a pure life annuity?
A straight life or life annuity
A client dies soon after annuitization with a straight life payout option. Is there a death benefit to a beneficiary?
No. The contract is based on the annuitants life only
Which annuity payout option pays the annuitant for life with no survivorship benefit?
The straight or pure life annuity payout
What factors affect the annuity payout amount?
Interest rates, contribution amounts, and payout option selected
Which annuity option does not guarantee an income for life, but rather an income for a predetermined number of years?
The annuity certain option
Who assumes the investment risk in a variable annuity contract?
The client or contract owner
What annuity payout option pays income to more than one party and stops upon death if any party listed on the contract?
The joint life option
What is the only method used to fund an immediate annuity?
Lump sum contribution
What is another name for the annuity accumulation phase?
The pay in ohase
Periodic annuity payments may be _________ or _________.
Level; flexible
What is another name for the annuity payout period?
The annuity phase
