Questions
2: Which of the following best describes what the annuity period is?
A The period of time during which accumulated money is converted into income payments
B The period of time from the accumulation period to the annuitization period
C The period of time during which money is accumulated in an annuity
D The period of time from the effective date of the contract to the date of its termination
The annuity period is the time during which accumulated money is converted into an income stream.
11: Which of the following can surrender a deferred annuity contract?
A The beneficiary after the owner’s death
B A deferred annuity cannot be surrendered.
C Only the annuity owner
D Only the insurance company for nonpayment of premiums
If the need arises, a deferred annuity contract may be surrendered only by the annuity owner. At surrender the owner receives the value of the annuity minus a surrender charge.
1: The equity in an equity index annuity is linked to
A The returns from the insurance company’s separate account.
B The annuitant’s individual stock portfolio.
C The insurance company’s general account investments.
D An index like Standard & Poor's 500.
Equity indexed annuities are not securities, but they invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.
3: Before he died, an annuitant had received $12,500 in monthly benefits from his $25,000 straight life annuity. He was also the insured under a $50,000 paid-up whole life policy that named his wife as primary beneficiary. Considering both contracts, how much will the annuitant's spouse receive in benefits?
A $50,000
B $62,500
C $75,000
D Nothing
The life policy would pay the face amount, but because of the settlement option selected on the annuity, payments would cease upon the annuitant's death. Straight life annuity payments stop at death of the annuitant regardless of the principal left in the account.
6: All of the following statements about equity index annuities are correct EXCEPT
A They invest on a more aggressive basis aiming for higher returns.
B The annuitant receives a fixed amount of return.
C They have a guaranteed minimum interest rate.
D The interest rate is tied to an index such as the Standard & Poor's 500.
Equity indexed annuities have a guaranteed minimum interest rate, so while they are aggressive in nature, the annuitant will not have to worry about receiving less than what the minimum interest rate would yield.
8: An agent selling variable annuities must be registered with
A FINRA.
B Department of Insurance.
C The Guaranty Association.
D SEC.
Because variable annuities are considered to be securities, a person must be registered with the FINRA (formerly NASD) and hold a securities license in addition to a life agent's license in order to sell variable annuities.
9: What form of the annuity settlement options provides payments to an annuitant for the rest of the annuitant's life and ceases at the annuitant's death?
A Life with guaranteed minimum
B Installment refund
C Joint and survivor
D Pure life
A Pure Life Annuity has the potential for providing the maximum income per dollar of premium if the annuitant lives beyond their life expectancy. However, if the annuitant dies before his or her life expectancy, and before the total benefit has been paid out, payments cease and there is no refund of payments to survivors.
14: The term “fixed” in a fixed annuity refers to all of the following EXCEPT
A Death benefit
B Guaranteed rate of interest
C Equal annuity payments
D Amount and length of payments
A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period. Annuities do not provide a death benefit.