Life & Health Insurance Flashcards

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.