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Questions and Answers
What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
What type of annuity has a cash value that is based upon the performance of its underlying investment funds?
- Variable (correct)
- Immediate
- Fixed
- Deferred
What type of annuity guarantees income payments for the rest of a person's life and provides payments to heirs if the person dies before a certain time?
What type of annuity guarantees income payments for the rest of a person's life and provides payments to heirs if the person dies before a certain time?
Life Annuity with Period Certain
Which of these is an element of a single premium annuity?
Which of these is an element of a single premium annuity?
- Monthly payments
- Lump-sum payment (correct)
- Annual payout
- None of the above
What annuity represents the largest possible monthly payment to an individual annuitant?
What annuity represents the largest possible monthly payment to an individual annuitant?
In an individual straight life annuity, what is accurate about the payments?
In an individual straight life annuity, what is accurate about the payments?
What risk does a life annuity protect against?
What risk does a life annuity protect against?
What is considered to be a characteristic of an immediate annuity?
What is considered to be a characteristic of an immediate annuity?
What does an immediate annuity consist of?
What does an immediate annuity consist of?
What type of contract liquidates an estate through recurrent payments?
What type of contract liquidates an estate through recurrent payments?
What type of annuity did P purchase after funding it with $500/month for 15 years before receiving retirement payments?
What type of annuity did P purchase after funding it with $500/month for 15 years before receiving retirement payments?
What type of annuity did N purchase that guarantees $2000/month starting at age 70?
What type of annuity did N purchase that guarantees $2000/month starting at age 70?
Which of the following would not be an acceptable annuity choice for W, who is 39 and wants income for life starting at age 60?
Which of the following would not be an acceptable annuity choice for W, who is 39 and wants income for life starting at age 60?
How does an indexed annuity differ from a fixed annuity?
How does an indexed annuity differ from a fixed annuity?
What is the type of annuity called that can be purchased with one monetary deposit?
What is the type of annuity called that can be purchased with one monetary deposit?
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Study Notes
Annuity Types and Features
- Variable Annuity: Cash value based on the performance of underlying investment funds.
- Life Annuity with Period Certain: Guarantees income for life with a minimum payment period; payments continue to a beneficiary if the annuitant dies before the period ends.
- Single Premium Annuity: Involves a lump-sum payment to fund the annuity.
- Straight Life Annuity: Provides the largest possible monthly payment to the annuitant as payments are made for life.
- Individual Straight Life Annuity: Payments are guaranteed for the lifetime of the annuitant.
- Deferred Annuity: Purchaser makes contributions over time and receives retirement payments after a specified period.
- Fixed Deferred Annuity: Offers guaranteed payments starting at a future date, e.g., guaranteed $2000/month from age 70.
Payment Structures
- Immediate Annuity: Starts benefit payments within one payment period of purchase, typically requiring a single premium.
- Indexed Annuity: Interest credited based on fluctuations of a linked index, differing from fixed annuities.
Additional Annuity Concepts
- Risk Protection: Life annuities protect against the risk of outliving one’s income.
- Estate Liquidation: Contracts that liquidate an estate through recurrent payments are classified as annuities.
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