Chapter 9: Insurance Contracts Flashcards
A(n) ______ is a contract with an insurance company that provides for payments to the ______ over the life of the contract term. These payments are made by the insurance company that issued the contract.
- Annuity
2. Annuitant
The person receiving the payments is known as the ______ and typically receives the payments at retirement, but may annuitize at any time according to the terms of the contract.
Annuitant
The annuity contract specifies that purchasing deposits be made into the contract either in a(n) ______ or through a series of ______.
- Lump Sum
2. Periodic Installments
Most annuities are offered by ______; however, ______ may also offer annuities.
- Insurance Companies
2. Broker/Dealers
To sell annuities, an individual must hold a(n) ______. Individuals selling variable annuities must hold a(n) ______ as well.
- Insurance License
2. Securities Registration
Annuities fall into two categories: ______ and ______.
- Fixed
2. Variable
______ annuities guarantee a certain amount of income based on the purchase payments deposited. The ______ assumes the investment risk of generating the return to support the income payments.
- Fixed
2. Insurance Company
The purchase payments are invested into the ______ of the insurance company for all fixed insurance products.
General Account
______ annuities are not securities because the insurance company assumes all investment risk.
Fixed
In a(n) ______ annuity, the contract holder, or ______, bears the investment risk in the separate account.
- Variable
2. Annuitant
Variable annuities keep purchase payments in a(n) ______, which is a professionally managed portfolio of securities, similar to a mutual fund.
Separate Account
The ______ performance will determine the amount of income the annuitant will receive.
Separate Account
The payments an annuitant receives from a(n) ______ remain constant for the life of the contract. The performance of the insurance company’s (or issuer’s) investment portfolio has ______ effect on the payments made to the annuitant.
- Fixed Annuity
2. No
The annuitant is guaranteed a(n) ______, which is stated in the contract. In other words, the insurance company accepts all ______ and is fully responsible for all gains or losses respective to the annuity contract.
- Minimum Rate of Return
2. Investment Risks
A(n) ______ afford annuitants guaranteed income that they cannot outlive. The annuitant also benefits from ______ of the assets on deposit in the contract through the insurance company.
- Fixed Annuity
2. Professional Management
A disadvantage of a fixed annuity is that the fixed payout does not keep up with ______. As ______ rises, the purchasing power of the fixed payments is eroded.
Inflation
The annuitant’s objective with a(n) ______ is lifetime income that will likely keep up with inflation.
Variable Annuity
With a(n) ______ annuity, the investor must accept the risk that portfolios may decline if market conditions are unfavorable.
Variable
With a(n) ______ annuity contract, the payments made by the issuer to the annuitant vary in dollar amount in accordance with the performance of the ______.
- Variable
2. Separate Account
There is no guarantee with a(n) ______ annuity, and the ______ assumes all investment risks of the portfolio.
- Guarantee
2. Annuitant
Variable annuities and insurance products are investments that are subject to ______ communications rules.
FINRA
Because of the substantial early withdrawal fees, deferred loads and potential tax penalties, it cannot be implied that variables annuities and variable life insurance contracts are ______, ______ investments.
- Liquid
2. Short-Term
The Investment Company Act of 1940 defines the ______ as an account established and maintained by the insurance company in which income, gains, and losses are credited to or charged against the account without regard to other income, gains, or loses of the insurance company.
Separate Account
The ______ account and ______ account are completely independent of each other. Assets in the ______ account cannot be commingled with assets in the ______ account or assets in other mutual funds in the family.
- Separate
- General
- Separate
- General