Chapter 7 Life Flashcards
S recently received a $500,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
Single Premium. Immediate Annuities are purchased with a single lump sum payment and will start providing income payments within the first year, but usually starting 30 days from the purchase date.
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Flexible Premium Deferred annuity
Variable annuity
Immediate annuity
Straight Life annuity
Immediate annuities start providing income payments usually starting within 30 days from the purchase date. Deferred annuities start providing income payments after the first year.
The annuity that represents the largest possible monthly payment to an individual annuitant is a(n)
Straight Life Annuity .The Straight Life annuity pays the largest monthly benefit to a single annuitant because it is based only on life expectancy, but it creates a risk that the annuitant may die early and forfeit much of the value of the annuity to the insurance company.
Equity indexed annuities are invested in
S&P 500. An indexed annuity is a type of tax-deferred annuity whose credited interest is linked to an equity index — typically the S&P 500.
If an annuity is terminated prior to beginning of the income payment period, the contract owner receives
The contract surrender value at that time.
Which of the following is a characteristic of a variable annuity?
Underlying equity investments
Does not have surrender chargers
Does not provide a transfer of ownership
Selling this product requires only a life license
Underlying equity investments.
Which of the following statements regarding a Tax Sheltered Annuity (TSA) is INCORRECT?
The income from the TSA is received income tax-free
The amount contributed is deductible from taxable income
The interest earnings are tax deferred
A tax-sheltered annuity is available to employees of non-profit organizations
The income from the TSA is received income tax-free. Upon retirement, payments received by employees from the accumulated savings in tax-sheltered annuities are treated as ordinary income.
N purchases an annuity by making payments in an amount no less than $100 quarterly. This describes which annuity?
Flexible Installment Deferred
G purchased a $50,000 single premium, Straight Life Annuity 2 years ago. G has been receiving monthly payments from the annuity. When G dies, the insurer
Does not have to make any further payments. With a Straight Life Annuity, the insurer does not have to make further payments after the annuitant dies.
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called
A Cash Refund annuity. A Cash Refund annuity promises that if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid.
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT
a(n)
Flexible Premium Deferred annuity
Variable annuity
Immediate annuity
Straight Life annuity
Immediate annuity. Immediate annuities start providing income payments usually starting within 30 days from the purchase date. Deferred annuities start providing income payments after the first year.
An individual who purchases a Life annuity is given protection against
the risk of living longer than expected. A Life annuity offers protection against the risk of living longer than anticipated.
Which type of contract liquidates an estate through recurrent payments?
Annuity. A contract that provides for the liquidation of all or part of an estate through periodic payments is known as an annuity.
The type of annuity that can be purchased with one monetary deposit is called a(n)
An immediate annuity
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
Fixed Deferred
