Unit 11 Flashcards
All of the following statements regarding annuities are correct EXCEPT:
(A) generally, annuity contracts issued today require fixed, level funding payments
(B) annuities are sold by life insurance agents
(C) an annuity is a periodic payment
(D) annuitants can pay the annuity premiums in lump sums
(A) generally, annuity contracts issued today require fixed, level funding payments
What annuity payout option provides for lifetime payments to the annuitant but guarantees a certain minimum term of payments, whether or not the annuitant is living?
(A) Installment refund option
(B) Life with period certain
(C) Joint and survivor
(D) Straight life income
(B) Life with period certain
Which of the following statements regarding annuity payout options is NOT correct?
(A) Under a straight life annuity option, all annuity payments stop when the annuitant dies.
(B) In a cash refund annuity, the annuitant’s beneficiary always receives an amount equal to the beginning annuity fund plus all interest.
(C) A period certain annuity guarantees a definite number of payments
(D) Joint and survivor annuities guarantee payments for the duration of 2 lives
(B) In a cash refund annuity, the annuitant’s beneficiary always receives an amount equal to the beginning annuity fund plus all interest.
James died after receiving $180 monthly for 6 years from a $25,000 installment refund annuity. His wife Lucy, as a beneficiary, now will receive the same monthly income until her payments total:
(A) $2,160
(B) $12,040
(C) $12,960
(D) $25,000
(B) $12,040
“Annuity payments are taxable to the extent that they represent interest earned rather than capital returned.” When an annuitized payout option is chosen, what method is used to determine the taxable portion of each payment?
(A) Exclusion ratio
(B) Marginal tax formula
(C) Surtax ratio
(D) Annuitization ratio
(A) Exclusion ratio
Before he died, Gary received a total of $9,200 in monthly income payments from his $15,000 straight life annuity. He also was the insured under a $25,000 life insurance policy that named his wife, Darlene, as primary beneficiary. Considering the two contracts, Darlene would receive death benefits totaling:
(A) $15,000
(B) $25,000
(C) $30,800
(D) $40,000
(B) $25,000
When a cash value life insurance policy is converted into an annuity in a nontaxable transaction, that event is generally known as:
(A) a rollover
(B) a 1035 exchange
(C) a modified endowment
(D) a pension enhancement
(B) a 1035 exchange
Joanna and her husband, Tom, have a $40,000 annuity that pays them $200 a month. Tom dies and Joanna continues receiving the $200 monthly check as long as she lives. When Joanna dies, the annuity payments cease. This is an example of:
(A) an installment refund annuity
(B) a joint and full survivor annuity
(C) a life annuity
(D) a cash refund annuity
(B) a joint and full survivor annuity
All of the following statements about variable annuities are correct EXCEPT:
(A) individuals who sell variable annuities must be registered with FINRA
(B) the contract owner bears the investment risk rather than the insurance company
(C) once a variable annuity has been annuitized, the amount of monthly annuity income cannot fluctuate
(D) during the accumulation period, the contract owner’s contributions to the annuity are converted to accumulation units and credited to the owner’s account
(C) once a variable annuity has been annuitized, the amount of monthly annuity income cannot fluctuate
Albert has purchased an annuity that will pay him a monthly income for the rest of his life. If Albert dies before the annuity has paid back as much as he put into it, the insurance company has agreed to pay the difference to Albert’s daughter. What annuity payout did Albert select?
(A) A straight-life income
(B) A life income with period certain
(C) A cash refund
(D) A fixed period
(C) A cash refund
Which of the following statements regarding equity index contract factors is most CORRECT?
(A) Equity index contracts usually follow all stock market changes exactly.
(B) All equity index contracts guarantee that cash values will grow a minimum amount each year.
(C) Most equity index contracts are backed by separate accounts and are variable products.
(D) Cash values of equity index contracts usually grow at a minimum interest rate.
(D) Cash values of equity index contracts usually grow at a minimum interest rate.
Which of the following statements best describes equity index contracts?
(A) Equity index contracts are always backed by investment in stocks.
(B) Selling equity index contracts always requires a license for variable products.
(C) Most of the investments backing equity index contracts are similar to those for non-indexed contracts.
(D) Cash values of equity index contracts mirror all changes in stock market values.
(C) Most of the investments backing equity index contracts are similar to those for non-indexed contracts.
