Annuities

Question 1

What benefit does the installment refund option on an annuity certain payout allow the beneficiary?

Answer 1

To continue to receive the remainder of the monthly income benefits.

Question 2

Which annuity allows for stock market appreciation with guaranteed downside protection?

Answer 2

An equity-indexed annuity

Question 3

The contribution phase of an annuity is called the ______________ period.

Answer 3

accumulation period.

Question 4

What type of annuity provides a predetermined income for life?

Answer 4

A fixed annuity

Question 5

What licenses are required for an agent to sell variable annuities or variable life?

Answer 5

Both a life insurance license and FINRA Series 6 or 7 license are required.

Question 6

What is another name for the annuity payout period?

Answer 6

The annuity phase

Question 7

Who assumes the investment risk in a variable annuity contract?

Answer 7

The client or contract owner

Question 8

True or False: The annuity owner and the annuitant do not need to be the same person.

Answer 8

True.

An annuity can be purchased for someone other than the owner.

Question 9

True or False: An annuity with a 20-pay certain annuity payout guarantees at least 20 years of payments will occur.

Answer 9

True.

At least 20 years of payment are guaranteed to the annuitant, the beneficiary, or both.

Question 10

Periodic annuity payments may be _______ or _________.

Answer 10

level or flexible.

Question 11

What is another name for the annuity accumulation phase?

Answer 11

The pay-in phase

Question 12

The ______________ rate is the percentage of the gain kept by an insurer, based on the overall return of an index.

Answer 12

The participation

Question 13

What is another name for annuity surrender charges?

Answer 13

Back-end loads

Question 14

n annuitant with a straight-life annuity dies after 9 years. How many years of benefit will his beneficiary receive?

Answer 14

$0. Straight-life payments cease on the death of the annuitant.

Question 15

Interest earned with a deferred annuity grows on a _______________ basis.

Answer 15

tax-deferred basis.

Question 16

A client dies soon after annuitizing with a straight-life payout option. Is there a death benefit to a beneficiary?

Answer 16

No. The contract is based on the annuitant’s life only.

Question 17

Which annuity payout option pays the annuitant for life with no survivorship benefit?

Answer 17

The straight or pure life annuity payout

Question 18

What is the risk of the straight-life annuity payout option?

Answer 18

There is no beneficiary payout after the annuitant’s death.

Question 19

Identify the acronym: SPA

Answer 19

Single Premium Annuity

Question 20

Which annuity payout would have the lower monthly income benefit–a 10- or 20-pay certain period?

Answer 20

The 20-pay certain period would have a lower payment since the guarantee is longer.

Question 21

What payout option provides payments for the annuitant’s whole life, but will cease at death?

Answer 21

The Straight-Life Payout option

Question 22

An annuitant with a 20-year certain annuity dies after 7 years, how many years of benefits will a beneficiary receive?

Answer 22

The beneficiary will receive the remaining 13 of the 20 years.

Question 23

What annuity’s growth is dependent on the performance of securities in a separate account?

Answer 23

A variable annuity

Question 24

Which annuity provides a guaranteed return–fixed or variable?

Answer 24

Fixed annuities

Question 25

The payout phase of an annuity may also be referred to as the _________ phase.

Answer 25

annuity phase.

Question 26

What annuity payout option pays income to more than one party and stops upon death of any party listed on the contract?

Answer 26

The Joint Life option

Question 27

What is another name for a pure life annuity?

Answer 27

A straight life or life annuity

Question 28

Traditional contract assets are placed in the insurance company's _________ account.

Answer 28

general account.

Question 29

The annuity benefit of a woman would be ____ than a man's because a woman is expected to ______________.

Answer 29

The annuity benefit of a woman would be LESS than a man's because a woman is expected to LIVE LONGER.

Question 30

What is the benefit of the Straight-Life payout option to the annuitant?

Answer 30

It provides the highest monthly income

Question 31

What is the annuity nonforfeiture value?

Answer 31

The value of an annuity minus any surrender fees

Question 32

What type of annuity is designed to pay income at a later date?

Answer 32

A deferred annuity

Question 33

All variable contract assets are placed in the insurance company's __________ account.

Answer 33

separate account.

Question 34

What modification is made to the straight-life payout option to guarantee payments for a minimum number of years?

Answer 34

Attaching a period certain to a payout

Question 35

What is the only method used to fund an immediate annuity?

Answer 35

Lump-sum contribution

Question 36

Annuity premiums may be paid as a __________, or on a ________ basis.

Answer 36

Annuity premiums may be paid as a LUMP-SUM, or on a PERIODIC basis.

Question 37

Identify the acronym: SPDA

Answer 37

Single Premium Deferred Annuity

Question 38

Inflation risk would be a concern for an owner of a _______ annuity.

Answer 38

fixed annuity.

Question 39

A single premium annuity may also be called a __________ annuity.

Answer 39

lump-sum annuity.

Question 40

What annuity provides a monthly income that varies depending on market performance?

Answer 40

A variable annuity

Question 41

The cash refund option of an annuity certain payout provides the beneficiary a __________ refund of remaining benefits.

Answer 41

lump-sum

Question 42

Which annuity option does not guarantee an income for life, but rather an income for a predetermined number of years?

Answer 42

The Annuity Certain option

Question 43

An annuity is designed to protect a person against ___________ his income.

Answer 43

An annuity is designed to protect a person against outliving his income.

Question 44

At annuitization (payout), accumulation units are exchanged for _________ units.

Answer 44

annuity units.

Question 45

Annuity withdrawals prior to age 59 1/2 will be subject to a ___% IRS penalty plus __________________ of earnings.

Answer 45

Annuity withdrawals prior to age 59 1/2 will be subject to a 10% IRS penalty plus FEDERAL TAXATION of earnings.

Question 46

Withdrawals from an annuity may not take place prior to age _______ without penalty.

Answer 46

59 1/2

Question 47

Describe a flexible premium deferred annuity.

Answer 47

Flexible payments (subject to monthly minimum), with tax-deferred growth until later withdrawn (e.g., at retirement)

Question 48

What is the purpose of an annuity?

Answer 48

To provide an income that the annuitant cannot outlive

Question 49

What account is used for the placement of an insurance company's variable contract assets?

Answer 49

A separate account

Question 50

Which annuity provides a fixed, guaranteed minimum rate of return?

Answer 50

A fixed annuity

Question 51

A flexible premium annuity usually requires a _________ monthly contribution.

Answer 51

minimum monthly contribution.

Question 52

Interest earned within an annuity grows ______________.

Answer 52

tax-deferred.

Question 53

True or False: A flexible premium deferred annuity is designed for future income.

Answer 53

True

Question 54

What factors affect the annuity payout amount?

Answer 54

Interest rates, contribution amounts, and payout option selected

Question 55

True or False: Joint and last survivor payouts will cease after the first annuitant dies.

Answer 55

False. The joint and last survivor payouts continue payment until the last surviving annuitant dies.

Question 56

If an annuity owner dies during the accumulation phase, what would the beneficiary be entitled to receive?

Answer 56

The higher of the total contributions or contract value on the date of death

Question 57

Which type of annuity would most likely be considered a security--fixed or variable?

Answer 57

A variable annuity

Question 58

An immediate annuity must begin making income payments within ____ days of the initial deposit.

Answer 58

30 days

Question 59

What type of annuity has no accumulation period?

Answer 59

A lump-sum or single premium annuity

Question 60

Annuitization is described as the _________________________ of an estate or pool of money.

Answer 60

systematic liquidation

Question 61

True or False: An annuity contract uses different mortality tables than a life insurance policy.

Answer 61

True

Question 62

Currently, ___________ companies are the only type of company that may sell annuities.

Answer 62

insurance