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Life insurance > Chap. 5 > Flashcards

Chap. 5 Flashcards

1
Q

Q: With a single premium deferred annuity, when will the annuity payments become available?

A

A: No sooner than 1 year after the annuity purchase

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2
Q

Q: What are the two types of refund life annuities?

A

A: Cash refund and installment refund

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3
Q

Q: How soon can income payments begin in an immediate annuity?

A

A: No later than 1 year from the time of annuity purchase

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4
Q

Q: What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and also guarantees payment for a specified number of years?

A

A: Life income with period certain

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5
Q

Q: Can a business or a corporation be an annuitant?

A

A: No, an annuitant must always be a natural person.

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6
Q

Q: What type of annuity can be purchased with a single premium?

A

A: Immediate annuity

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7
Q

Q: How are annuities classified depending on how many lives they cover?

A

A: Single life and multiple life annuities

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8
Q

Q: How long will a life annuity with a 15-year period pay?

A

A: For the life of the annuitant unless he/she dies within the first 15 years of the annuitization period; then the payments will last for 15 years.

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9
Q

Q: What is the disadvantage of owning a fixed annuity, as opposed to a variable?

A

A: In times of inflation, the benefit of a fixed annuity will have decreased purchasing power.

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10
Q

Q: Who receives income payments from an annuity?

A

A: Annuitant

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11
Q

Q: Who bears the investment risk in a fixed annuity?

A

A: The insurer

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12
Q

An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 2.5%. During an economic downswing, the investments only drew 2%. What interest rate will the insurer pay to its policyholders?

A

2.5%

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13
Q

Q: What type of annuity requires an agent to have a securities license?

A

A: Variable annuity

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14
Q

What license or licenses are required to sell variable annuities?

A

Both a life insurance license and a securities license

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15
Q

Q: If the current interest rate on an annuity is higher than the guaranteed rate, which rate will the annuity owner receive as part of the annuity payment?

A

A: Current

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16
Q

Q: What are the two classifications of annuities according to the time when annuity payments begin?

A

A: Immediate and deferred

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17
Q

Q: In an annuity, the accumulated money is converted into a stream of income during which phase?

A

A: Annuitization period

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18
Q

Q: Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity?

A

A: The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant’s death.

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19
Q

Q: In flexible premium payment annuities, the term “flexible” refers to what?

A

A: Amount of premium

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20
Q

Q: If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that?
Q:A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?

A

A: Joint life annuity

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21
Q

Q: What is the difference between a single premium and a flexible premium payment options in a deferred annuity?

A

A: The number of payments that purchase the annuity

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22
Q

Q: What annuity settlement option provides income payments to the annuitant for the duration of his or her life, and ceases at the annuitant’s death?

A

A: Pure life

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23
Q

Q: An individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have?

A

A: Annuity

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24
Q

Q: An annuity purchased with multiple payments that begin income payments after one year from the moment of purchase is known as what type of annuity?

A

A: Flexible premium deferred annuity

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25
Q

Q: If the annuitant dies during the accumulation period, who will receive the annuity benefits?

A

Beneficiary

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26
Q

Q: If there is no named beneficiary for the annuity benefits, to which entity will the benefits be paid?

A

A: Annuitant’s estate

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27
Q

Q: What causes a variable annuity benefit to vary?

A

A: The annuity’s underlying investments

28
Q

Q: What are the two phases of an annuity?

A

A: Accumulation and annuitization (or pay-in and pay-out)

29
Q

Q: Who possesses all the rights in an annuity?

A

A: Annuity owner

30
Q

Q: What type of license(s) is/are required in order to sell variable annuities?

A

A: A life insurance license and a securities license

31
Q

Q: What is the main reason for purchasing an annuity?

A

A: To provide income that the annuitant cannot outlive

32
Q

Q: How long is income paid under a pure life annuity?

A

A: Only for the life of the annuitant

33
Q

Q: Whose life expectancy is taken into consideration in an annuity contract?

A

A: Annuitant

34
Q

Q: If the annuitant dies before the annuitization period starts, what will the beneficiary receive?

A

A: Either the amount paid into the annuity or the cash value, whichever is greater

35
Q

Q: What type of annuity is suitable for someone who wants to select the benefit option that will pay the largest amount only for as long as the annuitant lives?

A

A: Straight life

36
Q

Q: What type of annuity credits its interest based upon an index such as S&P 500?

A

A: Equity indexed annuity

37
Q

The minimum interest rate on an equity indexed annuity is often based on

A

An index like Standard & Poor’s 500

38
Q

Q: What are accumulation units in annuities?

A

A: Ownership interest in the separate account (instead of buying shares, annuity holder purchases accumulation units)

39
Q

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level?

A

Bail-out

40
Q

Which of the following best describes a bail-out provision?

A

It allows the owner to surrender the annuity without a charge.

41
Q

Regarding the annuity period?

A

It may last for the lifetime of the annuitant.

42
Q

According to the nonforfeiture law, if the owner decides to surrender a deferred annuity prior to annuitization, the owner is entitled to which of the following?

A

Guaranteed surrender value

43
Q

Which of the following is true regarding a waiver of a surrender charge on an annuity contract?

A

The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

44
Q

After an annuity contract is delivered, a contract holder has a free-look period of

A

10 days

45
Q

Regarding installments for a fixed period annuity settlement option Not..

A

a life contingency option.

46
Q

Under which of the following annuity options does the annuitant select the time period for the benefits, and the insurer determines how much each payment will be?

A

Installments for a fixed period

47
Q

All of the following statements are true regarding installments for a fixed amount EXCEPT

A

The payments will stop when the annuitant dies.

48
Q

Annuities can be used to fund which of the following?

A

Retirement plans

49
Q

Which of the following will NOT be an appropriate use of a deferred annuity?

A

Creating an estate

50
Q

A married couple’s retirement annuity pays them $250 per month. The husband dies and his wife continues to receive $125.50 per month for as long as she lives. When the wife dies, payments stop. What settlement option did they select?
Q:A couple near retirement is planning for their golden years. They want to make sure that their retirement annuity provides monthly benefits for the rest of their lives. Should one of them die, the other would still like to continue receiving benefits. Which settlement option should they choose?

A

Joint and survivor

51
Q

Regarding a market value adjusted annuity?

A

The owner is guaranteed a fixed interest rate for a specific period of time.

52
Q

If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a

A

Joint life annuity.

53
Q

The annuity owner dies during the accumulation period without naming a beneficiary. Annuity’s cash value exceeds premiums paid. Which of the following is TRUE?

A

The cash value will be paid to the annuitant’s estate.

54
Q

The following is another term for the accumulation period of an annuity

A

Pay-in period

It would not occur in a deferred annuity.

55
Q

If an annuity contract has defaulted due to nonpayment of premiums, when can it be reinstated?

A

Within 1 year

56
Q

If an annuity was defaulted due to nonpayment of premium, what must happen before the policy can be reinstated?

A

All overdue payments and any debt due the insurer must be paid.

57
Q

The following is TRUE regarding variable annuities?

A

The annuitant assumes the risks on investment.

58
Q

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

A

Depreciation period

59
Q

The following is TRUE regarding the accumulation period of an annuity

A

It is a period during which the payments into the annuity grow tax deferred.

60
Q

What happens if a deferred annuity is surrendered before the annuitization period?

A

The owner will receive the surrender value of the annuity.

61
Q

Which of the following best describes what the annuity period is?

A

The period of time during which accumulated money is converted into income payments

62
Q

What’s false about an annuity owner is

A

The owner must be the party to receive benefits.

63
Q

Within how many days must an applicant for an annuity contract receive the disclosure document and the buyer’s guide if the application was not taken in a face-to-face meeting?

A

5 business days

64
Q

In regards to disclosure requirements for annuity contracts, if the buyer’s guide and the disclosure document are available to be printed from the insurer’s Web site,

A

This will fulfill the disclosure requirements for applications received through the Internet.

65
Q

An agent selling variable annuities must be registered with

A

FINRA

Life insurance (8 decks)

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