Session 8

Question 1

Annuity

Answer 1

is generally a contract between an individual and a life insurance company, usually purchased for retirement income

Question 2

Combination Annuities

Answer 2

attempts to provide a monthly payout that consists of guaranteed fixed amounts as well as a payout that might keep pace with inflation

Question 3

Index Annuities (IA)

Answer 3

credits interest to the owner’s account using a formula based on performance of stock or index. Guaranteed against loss and max capped

Question 4

Deferred Annuity

Answer 4

an annuity may be purchased with a single lump-sum investment

Question 5

Periodic Payment Deferred Annuity

Answer 5

allows a person to make periodic payments on monthly, quarterly or annually basis

Question 6

Immediate Annuity

Answer 6

are purchased by depositing a single lump sum

Question 7

How long does it take for a payout for Immediate Annuity?

Answer 7

60 Days

Question 8

Accumulation Stage

Answer 8

is the pay in period…if you miss a payment you wont forfeit the annuity

Question 9

Accumulation Units

Answer 9

is an accounting measure that represents an investor’s share of ownership in the separate account

Question 10

Sales charges and Variable annuities

Answer 10

there is no max…just has to be reasonable

Question 11

Annuity Pay Out Options (4)

Answer 11

1- Life Annuity/ Straight Life/ Pure Life
2- Life Annuity w/ Period Certain
3- Joint Life with Last Survivor Annity
4- Refund Annuity

Question 12

Life Annuity/ Straight Life/ Pure Life

Answer 12

biggest payout…the annuitant receives periodic payments over his lifetime

Question 13

Life Annuity w/ Period Certain

Answer 13

an annuitant receives payments for life, with certain minimum period guaranteed

Question 14

Joint Life with Last Survivor Annity

Answer 14

covers two or more people and payout is conditioned on both lives

Question 15

Refund Annuity

Answer 15

payments will continue after death of the insured until the full value of the initial premium has been returned

Question 16

Mortality Guarantee

Answer 16

annuity companies guarantee payments for as long as annuitants live

Question 17

Operating Expense Guarantee

Answer 17

insurance companies must project their own expense and set a ceiling for fees

Question 18

Assumed Interest Rate (AIR)

Answer 18

usually conservatively provides an earnings target for the separate account

Question 19

Variable Annuity Payouts

Answer 19

are determined by mortality tables and value of the account (aren’t guaranteed)

Question 20

Taxation of Annuities

Answer 20

since the contribution for annuities are made after tax only the earnings are taxed upon withdrawals

Question 21

9 Advantages of Variable Annuities

Answer 21

1- Tax- Deferred Growth
2- Guaranteed Death Benefit
3- Lifetime Income
4- IRS Section 1035
5- No 70 1/2 age restriction
6- No contortion limit
7- Choice of 25-30 different subaccounts w/ different objectives
8-Tax-free transfer between subaccounts
9- No probate

Question 22

IRS Section 1035

Answer 22

you can exchange from an annuity without an tax consequences

Question 23

Term Insurance

Answer 23

is protection for a specified period…offers pure protection and is the least expensive

Question 24

5 Main Points of Term Insurance

Answer 24

1- Provide temporary insurance protection for specified period
2- They pay the death benefit only if the insured dies during the term of coverage
3- Don’t accumulate cash value
4- Death Protection and premium remain level for the specified term
5- If renewed at the end of the term, the face amount remains the same but the premium will be based on age (Always increase)

Question 25

Whole Life Insurance (WLI)

Answer 25

coverage begins on the date of issue and continues to the date of the insured's death, provided premiums(fixed) are paid

Question 26

Cash Value of Whole Life Insurance

Answer 26

combines before death benefit with accumulation element... invest in conservative investments

Question 27

Policy Loans of Whole Life Insurance

Answer 27

borrow a portion of the cash value but must be paid back with interest

Question 28

Surrendering the Policy of Whole Life Insurance (3)

Answer 28

1- surrender the policy for its cash value 2- take a reduced paid-up policy where the death benefit is decreased and future premiums are no longer required 3- take extended term insurance which pays the beneficiary full face full if die within term

Question 29

Use of Whole Life Insurance

Answer 29

good for death benefits and if you need to borrow money in emergency situations

Question 30

Universal Life

Answer 30

comprised of two components of death benefit and cash value, but aren't fixed

Question 31

Characteristics of Universal Life (4)

Answer 31

1- Premium payments are separated first being paid toward the insurance protection then to build cash value 2- The policy owner may increase/decrease the death benefit during the policy term 3- Premium amounts may be changed as long as enough premium is paid to maintain the policy. (Flexible) 4- The interest earned by the cash account will vary, subject to a guaranteed minimum

Question 32

Universal Life Interest Rates

Answer 32

1- Current Annual Rate (what's on the market) | 2- Contract Rate (Minimum interest rate)

Question 33

Universal Life Death Benefits A

Answer 33

provides a level death benefit equal to the policy face value...as the policy cash value increases and the net death protect actually decreases over the life of the policy

Question 34

Universal Life Death Benefits B

Answer 34

provides for an increasing death benefit equal to the policy's face amount plus the cash account. High initial premium and low initial death benefit

Question 35

Universal Life Policy Loans

Answer 35

same as with the whole life insurance, must be paid with interest

Question 36

Cash Withdrawal for Universal Life

Answer 36

also called a partial surrender and if the amount is paid back later it will be treated as a premium payment

Question 37

Variable Life Insurance

Answer 37

cash value in the policy fluctuates with the performance of the separate account( PROVIDES MIN GUARANTEED Death BENEFIT)

Question 38

Scheduled Premium Variable Life

Answer 38

is issued with a minimum guaranteed death benefit

Question 39

Flexible Premium Variable Life

Answer 39

is a type of variable Life insurance with flexible premiums (Not Guaranteed)

Question 40

For Variable Life what are the 3 deductions to the Premium?

Answer 40

1- the administrative fee 2- the sales load 3- state premium taces

Question 41

Sales Charge Max is?

Answer 41

9% average over 20 years

Question 42

For Variable Life what are the 3 deductions to the separate account?

Answer 42

1-mortalitly risk 2-expense risk fee 3- investment management fee

Question 43

Variable Life Insurance Death Benefit

Answer 43

will have a guaranteed amount plus the amount the separate account as accumulated

Question 44

Variable Life Insurance Cash Value

Answer 44

reflects the investment held in the separate account and is calculated monthly