Unit 9 - Annuities Flashcards
What is the accumulation period in an annuity?
Money is being deposited and grows with interest tax deferred. Annuity value belongs to the contract owner.
What happens during the annuitization period?
Income is generated from accumulated money, which may come from the accumulation period or other sources.
Who owns the money during the annuitization period?
Money belongs to the insurance company.
What are the key roles of the owner in an annuity?
Names the annuitant, names the beneficiary, can withdraw money, can surrender the contract.
What does the annuitant receive?
Receives the income if the contract is annuitized.
What is the role of the beneficiary in an annuity?
Receives the accumulation value if the owner dies and may receive income payments if the annuitant dies sooner than expected.
How does life insurance differ from annuities?
Life insurance is for death benefits, while annuities are for living benefits, accumulating money or buying income.
What is an immediate annuity?
Purchased with a single premium, has no accumulation period, and income payments begin within 12 months.
What defines a deferred annuity?
Bought with a single premium or flexible premiums, has an accumulation period, and owner decides later on annuitization.
What is the tax implication of withdrawing money from an annuity before age 59½?
10% tax if withdrawn before 59½.
What is the purpose of a surrender period?
It is a waiting period.
What is the death benefit in an annuity?
Payout of accumulated money if the owner dies, or payout of money if the annuitant dies too soon.
What does the life annuitization option guarantee?
Income for life, regardless of how long, but payments stop upon death.
What happens with the life-refund option?
Income for life, and if death occurs before payments equal accumulation money, the balance goes to the beneficiary.
What is the life-period certain option?
Income for life, but if death occurs before the end of a specified period, remaining payments go to the beneficiary.
