Chapter 9: Variable Contracts and Municipal Fund Securities

Question 1

Variable Contracts

Answer 1

Payout to the investor is dependent on the performance of underlying portfolio of investments

Question 2

Annuity

Answer 2

Investor can invest a certain amount with the insurance company, and the company will return that amount in a series of payments each year

Question 3

Fixed Annuities

Answer 3

Fixed payments on an investment

Question 4

Variable Annuities

Answer 4

Variable rate of return of investment

Question 5

Subaccount

Answer 5

Account within a larger account

Question 6

What is the first phase on an annuity?

Answer 6

Accumulation Phase

Question 7

What is the second phase of an annuity?

Answer 7

Annuitization Phase

Question 8

Accumulation Phase

Answer 8

Where the investor makes deposits into the annuity

Question 9

Annuitization Phase

Answer 9

Investment is turned into regular income payments

Question 10

Payout Option

Answer 10

Withdrawal during the distribution phase of the contract

Question 11

Straight Life Annuity

Answer 11

Stable income stream to the owner over fixed periods during the time of the contract

Question 12

What distinguishes a straight life annuity from others?

Answer 12

Payment amount is based on the annuity holder’s life expectancy and when they die, no benefits are given to beneficiaries

Question 13

Life Annuity with a Certain Period

Answer 13

Guarantees payment for the entirety of the owner’s life and if the owner dies before that, annuity is passed to the beneficiary

Question 14

Joint and Last Survivor Annuity

Answer 14

Provides payment for two individuals, usually a couple, and payments will continue as long as one spouse is alive

Question 15

Unit Refund Life Annuity

Answer 15

Provides benefits throughout an owner’s lifetime and guarantees minimum payout amount to beneficiaries

Question 16

Qualified Annuities

Answer 16

Funded by pretax dollars

Question 17

Non-Qualified Annuity

Answer 17

Funded by post-tax dollars

Question 18

Equity-Indexed Annuities (EIAs)

Answer 18

Fixed annuity where the interest rate is based on the performance of the S&P 500

Question 19

Local Government Investment Pools (LGIPs)

Answer 19

Investment pools local/state governments create and manage to invest their cash

Question 20

Prepaid Tuition Plans

Answer 20

College savings plans that save for education expenses to pay tuition at colleges and universities

Question 21

Direct-Sold

Answer 21

College savings plans that the plan sponsor sell directly to the investor

Question 22

529 ABLE (529A) Plans

Answer 22

Tax-preferred savings plans for the disabled; only available if individual becomes disabled before 26