Questions and Answers
If the annuitant dies during the accumulation period, what does the beneficiary get?
the greater of cash value or total premium paid
When is non-qualified annuity interest taxed?
once the exclusion ratio has been calculated
What happens if the annuitant dies before the annuity start date?
premiums paid plus interest are paid to beneficiary
What is a disadvantage of fixed annuities?
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What annuity payout option allows the policy owner to choose a predetermined number of benefit payments?
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Fixed annuities provide all of the following EXCEPT:
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When does an immediate annuity, purchased with a single premium, begin to provide benefit payments?
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When does an immediate annuity begin making payments?
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Which of these annuities require premium payments that vary from year to year?
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If you purchase a fixed immediate annuity, what will the payment amount depend on?
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What is an annuity certain?
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How soon can benefit payments begin with deferred annuities?
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When does an immediate annuity begin making payments?
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Which of these has the highest monthly payout upon annuitization?
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What happens to interest earned if the annuitant dies before the payout start date?
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Study Notes
Annuity Benefits and Conditions
- If an annuitant dies during the accumulation period, beneficiaries receive either the cash value or the total premiums paid, whichever is greater.
- When a non-qualified annuity generates interest, taxation occurs after calculating the exclusion ratio.
- Should an annuitant die before the annuity's start date, the premiums paid plus interest are disbursed to the beneficiary.
Annuity Types and Payment Options
- A disadvantage of fixed annuities is that inflation can diminish the purchasing power of annuitant payments.
- The "period certain" payout option allows policy owners to select a predetermined number of benefit payments.
- Flexible premium immediate annuities and flexible premium deferred annuities require variable premium payments each year.
Characteristics of Fixed Annuities
- Fixed annuities guarantee interest, provide retirement funds, and offer tax advantages, but do not act as a hedge against inflation.
- After purchasing an immediate annuity with a single premium, the annuitant begins receiving benefit payments one month later.
- Benefit payments from a deferred annuity can start a minimum of 12 months after the purchase date.
Payment Structures and Timing
- Immediate annuities initiate payments after the first premium is paid.
- The payment amount for a fixed immediate annuity depends on factors like principal, interest, and the contract's income period.
- A "straight life" annuity option offers the highest monthly payout upon annuitization compared to other options.
Tax Implications for Annuities
- Any interest earned from an annuitant who dies before the payout start date is subject to taxation.
- An annuity certain guarantees a defined accumulation or payout, ensuring predictability for the policyholder.
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Description
Test your knowledge on key concepts in life and health insurance with these flashcards. Cover topics like annuitants, tax implications, and beneficiary payments. Perfect for students and professionals seeking to enhance their understanding of insurance terms and policies.
