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7.3.5 Investment Configuration

The investment configuration of an annuity can produce either a guaranteed rate of return or a rate of return that is not guaranteed.

Though there is a wide range of annuities with various options and features, all annuities may be divided into the following two basic types.

  1. Fixed annuities - A type of annuity that provides a guaranteed fixed benefit amount, payable for the life of the annuitant.
  1. Variable annuities - Payments fluctuate according to the value of an account invested primarily in common stocks.

Why are common stocks and other equity investments used in the investment portfolio underlying variable annuities?

Helpful Hint

1
Section 7.3 Review

An annuity must be funded through period payments.

a) True
b) False
CORRECTTRY AGAIN (Lesson 7.3.1)
Check your answer

2

Annuity payments can be made on a __________ basis.

a) monthly
b) quarterly
c) annual
d) Any of the above
CORRECTTRY AGAIN (Lesson 7.3.2)
Check your answer

3

If the annuitant dies prematurely before the annuity balance is depleted, which of the following payout options allow the balance of the principal to be paid out in a lump sum to the annuitant's beneficiary?

a) Straight life income
b) Cash refund option
c) Installment refund option
d) Life with period certain option
CORRECTTRY AGAIN (Lesson 7.3.3)
Check your answer

4

Under the Joint and Full Survivor option if one annuitant dies, the survivor receives the rest of the principal. If the survivor dies, what happens to the balance?

a) The balance is distributed to the survivor's beneficiaries.
b) The balance is forfeit.
c) If the suboption "joint and 2/3 survivor option" is chosen, 2/3 of the balance is distributed to the survivor's beneficiaries.
d) If the suboption "joint and 1/3 survivor option" is chosen, 1/3 of the balance is distributed to the survivor's beneficiaries.
CORRECTTRY AGAIN (Lesson 7.3.3)
Check your answer

5

The provides a guaranteed benefit amount, payable for the life of the annuitant. The payments fluctuate according to the value of an account invested primarily in common stocks.


Word bank: fixed annuity, variable annuity

The fixed annuity provides a guaranteed benefit amount, payable for the life of the annuitant. The variable annuity payments fluctuate according to the value of an account invested primarily in common stocks.

(Lesson 7.3.5)Check your answer