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Questions and Answers
How does an indexed annuity differ from a fixed annuity?
How does an indexed annuity differ from a fixed annuity?
Indexed annuity owners receive credited interest tied to fluctuations of the linked index.
Which of these is an element of a Single Premium annuity?
Which of these is an element of a Single Premium annuity?
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will continue to a beneficiary until the amount equals the contract value. This type of annuity is called?
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will continue to a beneficiary until the amount equals the contract value. This type of annuity is called?
An installment refund annuity.
Equity indexed annuities are invested in which of the following?
Equity indexed annuities are invested in which of the following?
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If an annuity is terminated prior to the beginning of the income payment period, what does the contract owner receive?
If an annuity is terminated prior to the beginning of the income payment period, what does the contract owner receive?
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W is a 39-year-old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)?
W is a 39-year-old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)?
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What is considered to be a characteristic of an immediate annuity?
What is considered to be a characteristic of an immediate annuity?
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An immediate annuity consists of a?
An immediate annuity consists of a?
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S recently received a $50,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
S recently received a $50,000 lump sum retirement buyout from her employer. She would like to buy an annuity that will immediately furnish her with a guaranteed income for life. What type of annuity is best suited for her situation?
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T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of 20 years. What type of annuity is this?
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of 20 years. What type of annuity is this?
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Which of the following is NOT included in an annuity contract?
Which of the following is NOT included in an annuity contract?
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The annuity that represents the largest possible monthly payment to an individual annuitant is a?
The annuity that represents the largest possible monthly payment to an individual annuitant is a?
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N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
N, age 50, recently bought an annuity that will pay a guaranteed $2,000/month at age 70 for life. What type of annuity did N purchase?
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An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called?
An annuity promises that, if the annuitant dies before receiving payments equal to the correct value, the payments will be continued to a beneficiary until an amount equal to the contract value has been paid. This type of annuity is called?
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Which type of contract liquidates an estate through recurrent payments?
Which type of contract liquidates an estate through recurrent payments?
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Which of the following annuities pays benefits based on units rather than specific dollar amounts?
Which of the following annuities pays benefits based on units rather than specific dollar amounts?
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Study Notes
Annuity Types and Characteristics
- Indexed annuities provide interest based on the performance of a specific index, unlike fixed annuities which guarantee a set interest rate.
- Single Premium annuities require a lump-sum payment to initiate the contract.
- Immediate annuities begin payments within one payment period after purchase, providing quick income.
Special Features of Annuities
- An installment refund annuity continues payments to beneficiaries if the annuitant dies before receiving the total contract value.
- Life annuity with period certain guarantees payments for a specified time (e.g., 20 years), ensuring beneficiaries receive payments if the annuitant dies early.
Investment and Surrender
- Equity indexed annuities typically invest in the S&P 500, linking returns to stock market performance.
- If an annuity is terminated before the income payment period starts, the owner receives the contract's surrender value.
Specific Annuity Examples
- A 39-year-old purchasing an annuity to start at age 60 would not consider an immediate annuity, as it begins payments right away.
- A fixed deferred annuity is suitable for someone like N, who will receive guaranteed monthly payments starting at a future date.
- A straight life annuity offers the highest monthly income but does not provide any further payments after the annuitant's death.
Exclusions and Considerations
- An annuity contract typically does not include Accidental Death and Dismemberment (AD&D) riders.
- Variable annuities calculate benefits based on units rather than fixed dollar amounts, allowing for more flexibility in payouts.
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Description
Test your knowledge on the key concepts of annuities in Chapter 7. This quiz will cover various types of annuities, including indexed and single premium annuities. Enhance your understanding and retention of essential definitions and features related to this important financial topic.
