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A contract that is designed to accumulate value over time with the intent to distribute the funds over the lifetime of an individual is called _________________.
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While life insurance may accumulate money that a person could use in retirement, none promise the same long term benefit of a non-qualified annuity, which is ________________.
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| Question | Answer |
|---|---|
| A contract that is designed to accumulate value over time with the intent to distribute the funds over the lifetime of an individual is called _________________. | An annuity |
| While life insurance may accumulate money that a person could use in retirement, none promise the same long term benefit of a non-qualified annuity, which is ________________. | A stream of income the annuitant cannot outlive: Although both annuities and life insurance offer tax-deferred growth of principal, the long term benefit of an annuity is the lifetime income stream available at any time to the annuitant. |
| When the owner and annuitant is the same person, a spouse beneficiary is permitted what choice under the Internal Revenue Code if the annuitant dies prior to annuitizing the contract? | To adopt the annuity as his/her own and become the annuitant or to name another annuitant: The spouse-benefic may adopt annuity as own. As the owner, he/she may name a new annuitant and/or beneficiary, or assign ownership to another person for value. |
| A flexWhich of these annuity distribution options promises the largest possible payment to a single annuitant? A Life income with period certain B Installment refund C Lump sum refund D Life income only | Life income only: The insurance company is at greater risk of paying more than the principal value at the time of annuitization, so it pays a larger amount based on the life expectancy of the annuitant |
| A “Joint and ½ Survivor” distribution option means | When one of the joint annuitants dies, the survivor’s continuing payments will be one-half of the total payment both were receiving:Payments continue until the last surviving annuitant has died. |
| What must an insurance producer have in order to market variable annuities? | A securities license as a variable contracts and investment company representative in addition to a life agent license |
| What is different about a corporate owned nonqualified annuity compared to an individually owned nonqualified annuity? | Interest or gains are taxable as income in the year earned |
| A Single Premium Immediate Annuity (SPIA) begins paying out its benefit: | No later than within 1 year:Under an SPIA, the idea is to have income begin immediately. There is essentially no accumulation period, and benefits begin within 1 year of the issue date. |
| Which of the following Annuities can it be said that it has 'upside potential, but no downside risk' when it comes to the stock market overall? A Fixed B Indexed C Market Value Adjustment D Variable | B Indexed The upside potential is the interest credited can be higher if the index the policy is linked to goes up, but just in case the index goes down it does not affect the cash values of the policy in a negative way. |
| Which of the following annuities uses unit values rather than dollars to account for its value? A Indexed B Market Value Adjustment C Fixed D Variable | D Variable Deposits buy accumulation units, distributions are from liquidation of annuity units. Units are like shares of a mutual fund. |
| If a corporation purchases a Group Deferred Annuity, what do the employees get? | certificate |
| The period of time from the first deposit into an annuity to the selection of a settlement option is considered the ___________ period. | Accumulation The period of time from the first deposit to the selection of a settlement option is considered the accumulation period, during which taxes are deferred. Accumulation periods are found within deferred annuities. |
| The owner of an annuity may do all of the following, except: A Name and change the beneficiary B Select or change the settlement option prior to death C Determine the contract's interest credit D Change the annuity date | C Determine the contract's interest credit The owner's rights begin at the time of purchase. An owner, who may also be the annuitant, may change the annuity date, beneficiary, and payout option. |
| All are benefits an annuity can provide that other investment or savings products cannot, except: A Guaranteed min death benefit B Tax-free distributions C Income ben payms that cannot be outlived D Guaran min withdrawal ben | Tax-free distributions |
| Which annuities are directly affected by a 'bullish' stock market? A Equity-Indexed and Market Value Adjustment B Equity-Indexed and Variable C Fixed and Market Value Adjustment D Fixed and Variable | Equity-Indexed and Variable A bullish stock market means that equity-based indices and funds will grow in value, directly benefiting the Equity-Indexed Annuity's interest credit and the Variable Annuity's separate account growth. |
| Which of the following annuities offers the best opportunity to offset the effects of purchasing power loss over the long-run? A Market Value Adjustment B Indexed C Fixed D Variable | Variable Since variable annuities are directly tied to the performance of the underlying separate account(s), this annuity has the best chance of maintaining purchasing power as it has no caps, spreads, or administrative fees &incl div |
| All are true regarding annuities, except: A They can liquidate an estate B They are designed to protect against outliving one's income C They are used primarily to provide a steady stream of income D They are similar to life insurance | They are similar to life insurance annuities are designed to distribute an estate, while life insurance is designed to create an estate. |
| If an annuity is purchased in December and monthly benefits begin in January of the following year, what type of annuity is it? | Single Premium Immediate Annuity The question addresses when the actual receipt of benefits from an annuity begins. When benefits begin within a year of the issue date, this is referred to as 'immediate'. |
| Electing a _____________ option for an annuity means that the annuitant will receive an income for life or for a temporary period of time. | Settlement |
| How can an annuity payout an income benefit income tax free? | Purchase the annuity within a Roth IRA account |
| Harry, the annuitant of a non-qualified tax deferred annuity with $40,000 cash value chooses Life Income w/ Refund Payment Option when he annuitizes to policy. After$1,000 each month for 80 months, Harry dies. How much will his beneficiary, Lucille, get? | Zero A Refund Option returns the remaining unpaid principal, since Harry lived well beyond the refund (principal amount) there would be no residual values remaining on the payment option selected. |
| In which of the following circumstances is an annuity's tax-deferral benefit lost? A The annuity is held beyond age 70 1/2 B The annuity has a long-term care rider C ann is owned by a corporation D ann is owned by someone other than the annuitant | Corporate |
| An annuitant owns an annuity that has been in force for 4 years. The policy has a 10-year surrender charge associated with it. If the annuitant suffered long-term disability & used funds from the annuity, what surrender charges would be assessed? | No surrender charge would be applied Annuity surrender charges are generally waived if the annuitant is hospitalized for an extended period, placed in a nursing facility, becomes disabled, or dies. |
| A lump sum of money is placed into an account from which the annuitant will draw periodic benefits beginning more than a year from the date of purchase. This describes a | Single Premium Deferred Annuity Regardless of how it is funded, by definition a deferred annuity does not begin its income stream for at least 13 months. Typically, the deferral period is many years, not just one. |
| Gloria needs to use her annuity as a long-term savings plan rather than as a short-term tax shelter, otherwise she will incur a ____% penalty tax against any taxable withdrawals prior to age 59 1/2. | 10% |
| All else being equal, which of the following will receive the smallest income benefit payment from an annuity?(old/young male/female) | young female bc longest life expectancy |
| Y just received an inheritance and instead of spending the money right now, decides to put it away for the future. What annuity premium funding would be best in this situation? | Single A single premium would allow Y to have the peace of mind of knowing that the inheritance is earning tax-deferred interest toward a future goal. |
| If Robert wishes to cash out his annuity at age 70 after having it for over 40 years, what should he know about prior to doing it? | The amount of tax-deferred earnings will now become taxable Cashing out an annuity exposes the tax-deferred earnings to income taxation |
| If the policyowner can withdraw funds from an annuity without surrender charges in the event interest crediting rates fall by more than a specific amount, this is referred to as a(n) ____________ provision. | Bailout provision allows the policyowner an opportunity to consider other savings and investing options if the insurer's interest crediting rate falls by a certain amount as specified in the policy. |
| Ralph has selected an annuity benefit or payment option where, upon annuitization, the annuity will pay a benefit for as long as either Ralph or a co-annuitant are alive. Ralph has elected which of the following benefit or payment options? | Life Income Joint and Survivor |
Created by:
rachel krystopowicz