Questions and Answers
When does an immediate annuity begin making payments?
After the first premium has been paid
Which of these will have the highest monthly payout upon annuitization?
Straight life
The taxable portion of each annuity payment is calculated using which method?
Exclusion Ratio
What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?
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Which of the following is considered to be the period when the accumulated value in an annuity is paid out?
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Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?
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Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
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How soon can the benefit payments begin with a deferred annuity?
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An annuity is primarily used to provide?
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Which of the following is an annuity that is linked to a market-related index?
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Which market index is normally associated with an indexed annuity's rate of return?
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If the annuitant dies before the annuity start date, what does the beneficiary receive?
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Which of these is considered to be a disadvantage of owning a fixed annuity?
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When does the annuitant typically begin receiving benefit payments after purchasing an immediate annuity with a single premium?
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Fixed period settlement options are considered to be a form of a(n)?
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Which of these annuities require premium payments that vary from year to year?
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How do interest earnings accumulate in a deferred annuity?
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Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?
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What is the nonforfeiture value of an annuity before annuitization?
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Which of these statements regarding the annuitant is correct?
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During the accumulation period, who can surrender an annuity?
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Study Notes
Annuity Basics
- Immediate annuities begin payments after the first premium is paid.
- A straight life annuity provides the highest monthly payout upon annuitization.
Taxation and Refunds
- The taxable portion of annuity payments is calculated using the exclusion ratio.
- A refund annuity returns the difference between the annuity value and income payments made if the annuitant dies during the distribution period.
Annuity Phases
- The annuitization phase is when the accumulated value in an annuity is paid out.
- A deferred annuity starts benefit payments a minimum of 12 months after purchase.
Settlement Options
- Life income settlements provide a specified amount to an annuitant with no residual value to beneficiaries.
- A life only annuity payout option makes no additional payments after the annuitant's death.
Purpose and Types of Annuities
- Annuities primarily provide retirement income.
- An equity-indexed annuity is linked to a market-related index, often associated with S&P 500 for rate of return.
Beneficiary Provisions
- If an annuitant dies before the annuity start date, the beneficiary receives the total premiums paid plus interest accrued.
Risks and Disadvantages
- Fixed annuities can lead to decreased purchasing power for annuitants during inflationary periods.
Payment Timing
- Annuitants typically begin receiving payments one month after purchasing an immediate annuity.
- Fixed period settlement options are types of annuities.
Premiums and Withdrawals
- Flexible premium deferred annuities allow varying premium payments each year.
- Interest earnings in deferred annuities accumulate on a tax-deferred basis.
Guarantees and Values
- Life annuity certain guarantees a stated number of payments regardless of the annuitant's survival.
- Nonforfeiture value before annuitization is calculated as all premiums paid, plus interest, minus any withdrawals and surrender charges.
Annuity Control
- The policyowner is the only individual who can surrender an annuity during the accumulation period.
- Annuity payments are based on the annuitant’s life expectancy, influencing the amount received.
Studying That Suits You
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Description
Test your knowledge of life insurance concepts with these flashcards based on Chapter 8. Review important terms and definitions related to annuities and their payment structures. Perfect for students preparing for exams in insurance studies.
