Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

variable annuity > variable annuity > Flashcards

variable annuity Flashcards

1
Q

purpose of variable products

A

introduced to provide insurance clients with the opportunity to experience “investment market returns” in their annuities and life insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

two types of variable models

A

fixed premium variable life (variable life) and flexible premium variable life (variable universal life)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

entire contract provision

A

“what you see is what you get”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

incontestability/suicide provision

A

if before 2 years, pays death benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

assignment provision

A

ownership may be collaterally (partial) or absolutely (completely) assigned.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

misstatement of age or gender provision

A

benefits will be adjusted to reflect what the premium paid would have bought at the actual age.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

grace period provison

A
  • whole life/variable life 31 days

- flexible premiums 61 days

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

automatic premium loan provision

A

may be requested by the owner to provide for paying premiums out of cash values.
-benefit limited to fixed premium policies (whole and variable) and 2 premium payments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

2 parts of the variable life death benefit

A
  • guaranteed minimum death benefit

- death benefit based on separate account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

variable life cash values

A

vary with performance of the underlying separate account and not guaranteed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

reinstatement policy provision

A
  • whole life- 3 years
  • variable life- 2 years
  • annuity- 1 year
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

conversion provision

A

says that a variable policy can be converted to a whole life policy.
-have to have had the initial account open for at least 18 months

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

policy loan provision

A

loans permitted after 3 years.

  • can get loans for up to 75% of cash value
  • max loan rate is 8%
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

premiums on variable whole life

A

premiums are fixed, level, and required

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

premiums on variable universal life

A

premiums are flexible. owner will be advised on a target premium to keep the policy paid to maturity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

2 free look provisions

A
  • 10 days from delivery date

- 45 days from date of application

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

general account

A

operating account of a life insurance company. usually invested in high grade bonds and commercial real estate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

separate account

A

segregated from general account. composed of a variety of investment sub account with full range of options.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

unitrusts

A

“indirect method”

-involves insurer contracting investments to an investment company. characterized by higher fees and investment company focused marketing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

open-end investment companies

A

“direct method”

-involves the insurer creating their own investment company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

rules for changing investment policy in the separate account

A

policy owners always have right to vote on major changes, but Georgia Code grants the Commissioner the authority to approve any changes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

how do you calculate net investment return

A

interest, dividends, and capital gains received minus expenses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

gross premium charges

A

charges taken directly from premiums, such as taxes, and loads

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

separate account charges

A

charges typically taken from the separate account, such as investment management, risk fees, and cost of insurance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

taxation of variable life

A

any gain beyond basis at surrender is taxable as ordinary income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

securities act of 1933

A

-full fair and disclosure

says prospectus is required prior to or during solicitation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

securities act of 1934

A
  • people act

- establishes the SEC to supervise issuers, their securities, and the markets in which they trade.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

investment company act of 1940

A

establishes open, closed, and UITs management companies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

purpose of annuity policies

A

protect the annuitant against living too long. primary role is to create retirement income.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

2 period of annuity policies

A
  1. accumulation period (building)

2. annuity period (payout)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

2 types of annuities

A
  • fixed

- variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

describe fixed annuities

A
  • guaranteed minimum interest rate
  • units worth $100
  • guaranteed level retirement income payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

describe variable annuities

A
  • produce accumulation based on investment performance and not guaranteed.
  • income stream will fluctuate with stock market so expectation is that it will keep up with inflation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

describe the 3 different types of premium payments in annuity policies

A
  • single premium. funded with a single payment. payout begins immediately.
  • flexible premium. initial payment opens account, then funded at any time
  • period payment. payments made systematically from payroll or bank account. can be modified at any time.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

describe an accumulation death benefit annuity guarantee

A

-most pay the higher of the account value or the sum of the premiums paid if the annuitant dies during accumulation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

describe taxation on annuities

A

-contributions are non-qualified (after tax dollars). because contributions are already taxed, the owner can take out all of basis dollars without taxes. at withdrawal, the gains will be taxed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

section 1035 exchange

A

says policies can be exchanged for other life policies or annuities without tax consequences.

  • annuity to annuity- OK
  • life to life- OK
  • life to annuity- OK
  • annuity to life- NOT OK
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

NASD

A

created in 1938 by the Maloney Act, as a self regulator entity to license and regulate broker dealers and their reps.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

single most important task in determining suitability is?

A

basic product availability (need for insurance)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

describe a suitable time horizon for annuity products

A

typically seen as long term. because they have have front end load charges, it takes time to make that up. should be invested with horizon of at least 10 years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

describe the operation rules for managing the separate account

A

10% of assets, 10% of stock rules- no more than 10% of assets may be in any single issue, and a separate account may not own more than 10% of the voting stock of any issuer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

Bond requirement on annuity

A

any person with access to the assets of a separate account must be bonded. the minimum is 10,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

3 rights of owners

A
  1. one vote per unit (VA) or per $100 of CV (VLI)
  2. recieve periodic reports- at least annually
  3. Separate account valuation- assets valued daily
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

code definition of variable life

A

means any individual or group policy issued by an insurance company providing for life insurance and benefits incidental thereto, underwhich values may vary as a result of underlying investments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

describe the commissioner’s powers

A

commissioner has sole and exclusive authority to regulate the solicitation, sale and insurance or variable life policies and to issue rules and regs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

reserve liability

A

insurance companies must maintain reserves to meet obligations of separate account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

affiliate of an insurer

A

any person directly or indirectly controlling or under common control with an insurer: people giving financial advice to insurers, directors, officers, partners, or employees of any insurer, immediate family.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

assumed investment rate (AIR)

A

forms the basis for projecting payments, but is not guaranteed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

general account

A

account that holds all of an insurers assets other than those in separate accounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

separate account

A

account that holds funds paid by variable annuity or variable life insurance contract holders.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

variable death benefit

A

amount paid to a beneficiary. depends on the investment performance. amount is added to any guaranteed minimum death benefit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

grace period for scheduled premium policies

A

-31 days from premium due date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

grace period for flexible premium policies

A

-61 days after mailing date of the statement to policyholder

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

reinstatement rules for scheduled premium policies

A

can be reinstated at any time within 2 years from the date of default, unless cash surrender value has been paid.
-110%, 6%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

incontestability

A

provision that states that any policy in incontestable by the issuer after it has been in force for 2 years.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

investment policy provision

A

states that the investment policy in a separate account can not be changed unless approved by the Insurance Commissioner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

describe policy loans

A

says you can take a loan against your policy after it has been in effect for 3 full years.
-75% of policy’s cash surrender value can be borrowed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

how long must advertising documents be filed?

A

4 years

59
Q

how long must notices of replacement be kept on file?

A

3 years

60
Q

when used in the context of a life insurance or annuity contract, “variable” refers to the contract’s..

A

investment performance

61
Q

which law principally regulates open end investment companies including variable separate accounts?

A

investment company act of 1940

62
Q

the primary difference between traditional life insurance contracts and variable contracts is that..

A

with traditional contracts the company assumes the risk, while with variable contracts the insured assumes that risk

63
Q

what main things are typically found in an annual report?

A
  • dividends received on portfolio
  • capital gains realized on portfolio securities
  • unrealized capital gains on portfolio securities
64
Q

how would you best describe the incontestability provision of the georgia code?

A

the incontestability period cannot run longer than 2 years from original issue date except that additional coverage will have an additional 2 year period.

65
Q

a strategy to blend various types of investments in an effort to reduce market risk is called..

A

diversification

66
Q

variable contracts may be characterized by their..

A
  • investment risk

- investment performance

67
Q

the account setup by the insurer to handle the variable contract assets is..

A

the separate account

68
Q

if your prospect wishes to purchase a life insurance policy that will enable him to have a guaranteed death benefit but, at the same time, take advantage of potentially higher market rates over the next 25 years, you would recommend..

A

scheduled premium variable life

69
Q

the insurance commissioner has promulgated many rules regarding advertising relating to insurance policies. the ultimate responsibility for insuring that these ads comply with regulations is that of..

A

the insurance company

70
Q

in order to be able to sell a flexible premium variable life insurance policy an agent must be appointed by..

A

the insurance company

71
Q

a life insurance policy with benefits tied to the performance of a separate account that allows the policyholder to skip premium payments is called..

A

a flexible premium variable life insurance policy

72
Q

the first step in determining a client’s suitability for a variable contract is determining the client’s..

A

need for insurance protection

73
Q

insurer general accounts are usually required by state law to invest primarily in..

A

bonds and commercial real estate

74
Q

pure life protection is usually associated with..

A

term life

75
Q

under the indirect investment method, the separate account is organized as..

A

a unit investment trust

direct method is mutual funds, open end companys

76
Q

when selling a new insurance policy that will be replacing one that is currently in force, the agent must..

A

complete the appropriate replacement

77
Q

what kind of insurance products require an NASD license to sell?

A

variable life

78
Q

what are three benefits of life insurance?

A
  • cash values accumulate on an income-tax differed basis
  • cash value usually may be withdrawn on a FIFO basis
  • the death benefit is usually paid income tax free
79
Q

on a fixed premium variable life insurance policy, the insured is guaranteed..

A

at least 100% of the stated death benefit

80
Q

premiums for a variable life policy usually are..

A

fixed as to the payment amount and schedule

81
Q

if life insurance has cash value that varies with investment experience and a flexible premium schedule, it must be..

A

flexible premium variable or variable universal life

82
Q

a type of permanent life insurance with flexible premiums, renewable term death benefit and cash values would be called..

A

universal life

83
Q

investment risk is a characteristic of..

A

variable contracts

84
Q

describe the free look provision on variable annuities

A

10 days from date of delivery and 45 days from date of application

85
Q

the primary purpose of an annuity is to..

A

provide a long term stream of income

86
Q

describe variable life contract loans

A

are permitted, but not in amounts equal to 100% of cash value

87
Q

because of its flexible features, variable life insurance can help a policyholder do what three things?

A
  • fund a child’s education
  • provide additional retirement income
  • obtain cash values loans for an emergency
88
Q

what is guaranteed in a variable annuity contract? 4 things

A
  • choice of settlement options
  • tax deferral of any earnings
  • death benefit
  • expenses
89
Q

how are separate accounts and contract holder’s account valued?

A
  • separate valued daily

- contract holder’s valued monthly

90
Q

variable annuities are sometimes referred to as dually registered products. this refers to the fact that they are registered..

A

with the state as an insurance product and the SEC as a securities product

91
Q

variable and flexible premium variable life are distinguished from other policies by..

A

the use of a separate account to fund policy values

92
Q

variable life insurance permits policy loans of..

A

at least 75% of cash value

93
Q

one of the distinct properties of variable insurance contracts is the existence of the separate account. the assets held in that separate account legally are the property of..

A

the insurance company

94
Q

regulations require that the death benefit of a variable life insurance policy be calculated no less frequently than..

A

annually

95
Q

in the separate account, the insurance company must maintain what?

A

maintain surplus equal to the obligations of the account

96
Q

describe the reinstatement period for all the types of variable products.

A
  • whole life- 3 years
  • universal life- 2 years
  • annuity- 1 year
97
Q

if your client purchased a participating variable life insurance policy. what can he do with the dividends?

A
  1. purchase paid up additional insurance
  2. the amount of the dividend may be left on deposit with the insurer to accumulate
  3. take them in cash
98
Q

the settlement option providing payments for as long as the beneficiary lives is..

A

straight life income

99
Q

variable life policies must be able to be exchanged for fixed benefit policies within..

A

18 months

100
Q

the variable loan interest rate of a variable life policy usually..

A

varies with a published corporate bond index

101
Q

to avoid being classified as a MEC, a policy must satisfy what?

A

7 pay test

102
Q

before or at the time of a variable product sale, the buyer must be given..

A

a prospectus

103
Q

one of the valuable features of a variable life insurance policy is the conversion privilege. By state law, this right is in effect for?

A

the first 18 months after the policy issue date

104
Q

in order for an insurance company to sell variable contracts in this state, it must have the approval of..

A

the state insurance commissioner

105
Q

mr. and mrs. williams have purchased a joint and two thirds survivor immediate variable annuity. upon the death of the first of them, the survivor will receive..

A

a monthly payment for life that is equal to two thirds of what the annuity units would have provided prior to the death of the first annuitant

106
Q

in a universal life policy, the premium “suggested” by the insurer is called?

A

a target premium

107
Q

a variable contract owner paid a 300 premium on a date when the unit price was 6.60. how many units were acquired?

A

45.45 - 300 % 6.6

108
Q

if a variable policy owner stops paying premiums and gives no notice to the insurer, what is likely to occur?

A

the cash value in the policy will be used to purchase extended term insurance (1 year)

109
Q

compared to traditional life and annuity contracts, variable products have more..

A

compliance issues

110
Q

the net investment return represents?

A

the amount credited to the policyholder

111
Q

how would you describe the type of insurance purchased by those who are hoping to take advantage of higher interest rates?

A

universal life plan

112
Q

in order for a domestic insurer to transfer cash or securities out of the separate account, permission would be needed from?

A

the state insurance commissioner

113
Q

if an agent offered a prospect an inducement, other than something stated in the policy, the agent would be considered to be..

A

in violation of the rebating rules

114
Q

a variable policy’s death benefit will increase if the investment return in the separate account is?

A

greater than the assumed investment return (air)

115
Q

a life policy where the death benefit may be less than the original face is?

A

a variable universal life policy

116
Q

what may not be deducted from a variable universal premium payment?

A

issue charges

117
Q

a separate account’s investment policy must be stated where?

A

in the prospectus

118
Q

the cash value of a flexible variable life policy may fluctuate how?

A

may rise or fall on the investment experience of the separate account

119
Q

the holder of a variable life insurance policy must be provided with?

A
  • a statement of the net investment results of separate account at least annually
  • a list of portfolio holdings in separate account
  • a statement in bold type that states purpose of policy
120
Q

one of the most distinguishing factors of variable life is?

A

cash values are dependent upon performance of the separate account

121
Q

an annuity containing both fixed and variable elements is known as?

A

a combination annuity

122
Q

the voting rights of a variable annuity contract holder is shown in the?

A

prospectus

123
Q

during the annuity period, the annuitant’s payments are taxed as?

A

income for the amount not attributed to cost

124
Q

an individual who has terminated annuity premiums would normally be allowed to do what three things?

A
  • surrender the contract for its cash value
  • use the cash value to buy a paid up deferred annuity
  • use the cash to buy a paid up immediate annuity
125
Q

the most important reason to purchase a variable life insurance policy is for the death benefit. the cost of this protection is an obligation of the?

A

separate account

126
Q

describe the relationship between annuity units and their value during the payout period of a variable annuity.

A

the number of units remains constant; the unit value varies.

127
Q

the variable life insurance policy that you offer is similar to the new york life plan. this means that the death benefit is adjusted how often?

A

monthly

128
Q

what would you see on the face page of a variable life policy?

A
  • a statement of minimum guaranteed death benefit
  • an insuring clause signed by an officer of the insurer
  • a statement as to whether the policy is participating
129
Q

accumulation unit values in all separate accounts must be calculated when?

A

each business day except legal holidays

130
Q

variable annuities where developed primarily to do what

A

counter the corrosive effects of inflation on retirement income.

131
Q

unlike mutual funds or other financial products, variable annuities include?

A

mortality and expense charges

132
Q

monthly payments into a deferred variable annuity purchase what?

A

accumulation units

133
Q

there are a lot of things that can avoid penalties during early distribution. what does not?

A

financial hardships

134
Q

the most common restriction to fund transfers in variable annuities prevents..

A

transfers involving the general account

135
Q

in a variable annuity, the payments received by the annuitant are based on?

A

the value of an annuity unit

136
Q

when withdrawing funds from a deferred annuity, the policyholder faces what?

A

possible contract surrender charges

137
Q

section 1035 of the internal revenue code allows?

A

the exchange of one deferred annuity for another without current taxes

138
Q

the amount of salary being withheld to buy an annuity under a 403b plan is called?

A

the withholding allowance

139
Q

if a qualified plan annuitant had no cost basis, payments at retirement would?

A

be taxed entirely as ordinary income

140
Q

separate account assets are valued at their?

A

market value on the date of valuation

141
Q

who is not technically an affiliate of an insurer?

A

a policyowner

142
Q

your client’s variable life policy states that the interest rate on policy loans is fixed. that being the case, state law prohibits the rate from exceeding..

A

8%

143
Q

the maximum rate of interest that may be charged on a defaulted policy for the purposes of reinstatement is?

A

6%

variable annuity (2 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions