Questions and Answers
Variable annuities may invest premiums in each of the following, EXCEPT:
What constitutes an immediate annuity?
Single Premium
What type of annuity did P purchase if P will fund it with $500/month for 15 years and then receive retirement payments?
Deferred
Payments are made to an annuitant for life in an Individual Straight Life annuity.
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What risk does an individual who purchases a life annuity get protection against?
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What type of annuity did N purchase if it pays a guaranteed $2,000/month at age 70 for life?
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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):
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What is the type of annuity that can be purchased with one monetary deposit?
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What type of annuity is best for S who has received a $500,000 lump sum retirement buyout and wants guaranteed income for life?
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What is considered to be a characteristic of an immediate annuity?
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Which of these is an element of a Single Premium annuity?
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The income from a Tax Sheltered Annuity (TSA) is received income tax-free.
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What type of annuity continues payments to a beneficiary if the annuitant dies before receiving payments equal to the contract value?
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When G dies, the insurer must make further payments for a Straight Life Annuity.
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If an annuity is terminated prior to the beginning of the income payment period, the contract owner receives:
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What type of annuity represents the largest possible monthly payment to an individual annuitant?
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An annuity that requires payments in an amount no less than $100 quarterly describes which type of annuity?
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What does T receive when purchasing a Straight Life Annuity after withdrawing cash from a profit-sharing plan?
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Which type of annuity pays benefits based on units rather than specific dollar amounts?
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What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
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Which of the following is NOT included in an annuity contract?
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What type of annuity guarantees an income payment for the rest of T's life, with guaranteed payments to his son if T dies before 20 years?
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What is the difference between an indexed annuity and a fixed annuity?
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Which of the following is a characteristic of a variable annuity?
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Study Notes
Annuities Overview
- Variable annuities do not invest premiums in the insurer's corporate business account.
- Immediate annuities consist of a single premium payment made upfront.
- Deferred annuities allow for contributions over time, such as funding with $500/month for 15 years before receiving retirement payments.
Types of Annuities
- Individual Straight Life annuity pays the annuitant for life without returns to beneficiaries after death.
- Life annuities protect against longevity risk, ensuring income even if the annuitant lives longer than expected.
- Fixed Deferred annuity provides guaranteed payouts, exemplified by N's $2,000/month beginning at age 70.
- Immediate annuities begin benefit payments within a short period after purchase, typically using a single premium.
- Single Premium annuities require a lump-sum payment for immediate benefits.
Annuity Characteristics
- Tax Sheltered Annuities (TSA) provide tax advantages but do not offer income tax-free benefits.
- An installment refund annuity ensures that payments continue to a beneficiary if the annuitant dies before receiving full benefits.
- Straight Life annuities offer the largest possible monthly payment, ceasing payments upon the annuitant's death, with no further payments required from the insurer.
Payments and Surrender
- If an annuity is terminated early, the contract owner receives the surrender value of the contract.
- A flexible installment deferred annuity allows for regular contributions with a minimum payment requirement, like quarterly payments starting at $100.
Indexed and Variable Annuities
- Indexed annuities link credited interest to the performance of a specific market index, differing from traditional fixed annuities.
- Variable annuities involve underlying investments in equities and are based on unit values rather than fixed dollar amounts.
Beneficiary Provisions
- Life Annuity with Period Certain guarantees payments for a specific duration, even to beneficiaries, if the annuitant passes away before that period ends.
- An AD&D rider is not typically included in standard annuity contracts.
Conclusion
- Understanding these fundamental concepts related to different types of annuities and their characteristics is crucial for selecting appropriate retirement income solutions.
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Description
Test your knowledge on annuities with these flashcards that cover key concepts and definitions. Each card presents critical questions about variable and immediate annuities, as well as specific scenarios about annuity purchases. Perfect for anyone studying finance or insurance.
