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LAH - 1755 > Chapter 9 - Annuities > Flashcards

Chapter 9 - Annuities Flashcards

1
Q

What is an annuity?

A

An agreement for one person or organization to pay another a stream or series of payments. It is considered to be a mirror image of life insurance.

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2
Q

What is the accumulation phase?

A

Is the period of time wherein the annuity builds up its value.

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3
Q

What is the annuitization phase

A

When it disburses the stream of payments

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4
Q

Attractive features of annuities

A

Tax deferral on investment earnings capital gains and investment income
Protection from creditors
An array of investment options
Tax free transfers among investment options
Lifetime income
Benefits to your heirs

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5
Q

Is there tax consequences if you change how your funds are invested?

A

No

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6
Q

Annuitant.

A

Also known as the measuring life. This is the person who receives the benefits or payments from the annuity.

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7
Q

Owner.

A

The person who purchases the contract. All rights of ownership such as naming beneficiaries, selecting payout option.

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8
Q

Beneficiary.

A

Person designated to receive the benefits from the annuity if the annuitant dies during the accumulation period.

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9
Q

Free look provision

A

10 calendar days from the date of contract to return for a full refund.

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10
Q

Grace period.

A

31 days following the premium due date to pay the overdue premiums. If claims arise insurer may deduct from death benefit.

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11
Q

Incontestability provision.

A

Other than age gender and identity required as a condition of contract The contract shall be incontestable after 2 years

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12
Q

Entire contract clause

A

The contract together with a copy of the application is the entire contract.

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13
Q

Reinstatement

A

Can reinstate policy within 3 years and by paying the overdue premiums plus interest, any loans outstanding, and provide evidence of insurability.

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14
Q

Policy surrenders.

A

Annuities or back end loaded products. Charge on cash value upon termination or withdrawal of funds. Surrender charge is a % of withdrawals and decreases over time.

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15
Q

Fixed annuities

A

Pay a fixed rate of return. The pay out is a set amount and is guaranteed.
Insurance company guarantees the principle.
A minimum rate of interest.
A level death benefit. Part of the insurer general account.

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16
Q

Variable annuities

A

Allows you to invest in stock or bond market.
Stock market will determine end value
Amount paid out is determined by investment performance (net expenses) of the fund.

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17
Q

Immediate annuities

A

Designed to convert a lump sum into an annuity so that income is immediately received. Provides income that you cannot outlive. Taxes only paid on earnings. Not taxed on principle.

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18
Q

When do payment start for immediate annuities.

A

A month after your purchase of the annuity

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19
Q

Deferred annuities.

A

Designed to accumulate premiums for a later payout. Payment of income taxes are deferred until withdrawal. No limits on annual contributions. Death benefit.

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20
Q

Annuity pay out - interest only

A

Insurance company keeps principle amount in the annuity earning interest and sends said interest to the annuitant.

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21
Q

Annuity pay out - Fixed amount

A

Pays the annuitant a set amount until the principle and interest are used up. Set amount depends on the period.

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22
Q

Annuity payout - fixed period.

A

Pays the annuitant an income a specified period of time. Fluctuation in interest rate effects amount.

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23
Q

Life contingency option - life Income No Refund

A

Straight life income or Pure life

Annuitant will receive income for life. Even after all money put in annuity is used. If death occurs money is forfeited.

24
Q

Why would you open an annuities account.

A

For retirement. To ensure your income last as long as you do.

25
Q

Tax deferral on investment earnings capital gains and investment income
Protection from creditors
An array of investment options
Tax free transfers among investment options
Lifetime income
Benefits to your heirs

A

Attractive benefits to annuities

25
Q

Also known as the measuring life. This is the person who receives the benefits or payments from the annuity.

A

Annuitant

25
Q

Grace period - survivorship annuity

A

Insurer may reduce annuity payments to take into account portion of any unpaid payment applicable to the period

26
Q

31 days. Insurer may reduce annuity payments to take into account portion of any unpaid payment applicable to the period

A

Grace period - survivorship annuity

26
Q

Other than age gender and identity required as a condition of contract The contract shall be incontestable after 2 years

A

Incontestability provision

26
Q

Annuities or back end loaded products. Charge on cash value upon termination or withdrawal of funds. Surrender charge is a % of withdrawals and decreases over time.

A

Policy surrender

26
Q

Pay a fixed rate of return. The pay out is a set amount and is guaranteed.
Insurance company guarantees the principle.
A minimum rate of interest.
A level death benefit.

A

Fixed annuities

26
Q

Allows you to invest in stock or bond market.
Stock market will determine end value
Amount paid out is determined by investment performance (net expenses) of the fund.

A

Variable annuities

26
Q

Designed to convert a lump sum into an annuity so that income is immediately received. Provides income that you cannot outlive. Taxes only paid on earnings not on principle.

A

Immediate annuities

27
Q

Designed to accumulate premiums for a later payout. Payment of income taxes are deferred until withdrawal. No limits on annual contributions. Death benefit.

A

Deffered annuity

28
Q

Insurance company keeps principle amount in the annuity earning interest and sends said interest to the annuitant.

A

Annuity payout - interest only

29
Q

Pays the annuitant a set amount until the principle and interest are used up. Set amount depends on the period.

A

Annuity payout - fixed amount

30
Q

Pays the annuitant an income a specified period of time. Fluctuation in interest rate effects amount.

A

Annuity pay out - fixed period.

31
Q

Straight life income or Pure life

Annuitant will receive income for life. Even after all money put in annuity is used. If death occurs money is forfeited.

A

Life contingency option - life income no refund.

32
Q

Life income with cash or installment funds.

A

Guaranteed minimum. Income for life however if annuitant dies before receiving all benefits then beneficiary gets left over.

33
Q

Guaranteed minimum. Income for life however if annuitant dies before receiving all benefits then beneficiary gets left over.

A

Life income with cash or installment refund

34
Q

Life income period certain

A

Cannot outlive income. If annuitant dies before stipulated time frame payments will continue to beneficiary for remainder of period.

35
Q

Cannot outlive income. If annuitant dies before stipulated time frame payments will continue to beneficiary for remainder of period.

A

Life income period certain

36
Q

Life income joint and survivor

A

Pays benefit over two lifetimes as opposed to 1. Provides the least income because of length of time.

37
Q

Pays benefit over two lifetimes as opposed to 1. Provides the least income because of length of time.

A

Life income joint survivor

38
Q

Exclusion ratio

A

Annuity payment that is not income taxes because it is return of original principle

39
Q

Annuity payment that is not income taxes because it is return of original principle

A

Exclusion ratio

40
Q

Single premium arrangement

A

Single payment that might be invested in growth for a long period of time for deferred annuity or for a short period of time for immediate annuity. Sales of assets or rollovers.

41
Q

Single payment that might be invested in growth for a long period of time for deferred annuity or for a short period of time for immediate annuity. Sales of assets or rollovers.

A

Single premium payment

42
Q

Flexible premium payment

A

Pay whatever and whenever annuitant wants

43
Q

Pay whatever and whenever annuitant wants

A

Flexible premium

44
Q

Fixed or level premium payment

A

Payment for same amount of premium for a specified time. Can only be used for deferred annuity

45
Q

Payment for same amount of premium for a specified time. Can only be used for deferred annuity

A

Fixed or level premium.

46
Q

Equity indexes annuities

A

A type of fixed annuity. Credits minimum rate of interest but it’s value is also based on performance of stock index

47
Q

A type of fixed annuity. Credits minimum rate of interest but it’s value is also based on performance of stock index

A

Equity indexes annuities

48
Q

Guaranteed minimum withdrawal benefit

A

Found in variable annuities and protects the annuitant against market risk by guaranteeing the right to withdraw a % of entire investment each year until the entire initial investment is recovered.

49
Q

Found in variable annuities and protects the annuitant against market risk by guaranteeing the right to withdraw a % of entire investment each year until the entire initial investment is recovered.

A

Guaranteed minimum withdrawal benefit

LAH - 1755 (3 decks)

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