Lesson 7 Quiz

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1	Purpose and Function of Annuities Life insurance is concerned with an estate, whereas annuities are concerned with an estate. Word bank: creating, liquidating Life insurance is concerned with creating an estate, whereas annuities are concerned with liquidating an estate. Lesson 7.1

The amount of an annuity payment is based upon which of the following factors?

Life insurance companies are uniquely qualified to guarantee annuity payments due to what is referred to as the survivorship factor.

Annuity Basics

Before the payout period begins, the annuity is in the:

Structure and Design

Annuities are typically flexible in their design structure. Match the following structures with their respective descriptions.

a)	Provides a single lump sum payment or periodic payments over time.
b)	Allows immediate payments or deferred until a future date.
c)	Gives the recipient options of receiving returns for a specified term or for life, or a combination of both.
d)	Allows for a fixed rate of return or a variable rate of return.
a) Funding Method b) Date Annuity Benefit Payments Begin c) Payout Period d) Investment Configuration (Lesson 7.3)

A straight life income annuity option provides for annuity payments to the annuitant for as long as he or she lives. Upon the annuitant's death:

There are a number of payment options available through annuities. Match the following payout options with their respective descriptions.

a)	Guaranteed income for the annuitant's lifetime.
b)	Guaranteed income for the annuitant's lifetime; or if the annuitant dies before funds are depleted, the policy beneficiary receives a lump sum cash payment.
c)	Guaranteed income for the annuitant's lifetime; or if the annuitant dies before funds are depleted, the policy pays the beneficiary in periodic installments.
d)	Guaranteed income for the annuitant's lifetime; and if the annuitant dies before the period certain has expired, the policy pays the beneficiary in periodic installments until the end of the designated period.
e)	Guaranteed payments for a certain period of time; if the annuitant dies before the period has expired, the policy pays the beneficiary through the remainder of the period.
f)	Provides income for two people; if one dies, the same income payments continue to the survivor for life. There is no beneficiary after the second person dies.
a) Straight Life Income Annuity b) Cash Refund Option c) Installment Refund Option d) Life With Period Certain e) Period Certain Option f) Joint and Full Survivor Option (Lesson 7.3.3)

Tax Treatment and Benefits

If pre-tax dollars are withdrawn before age ______ on a tax-deferred annuity, a ______ excise tax penalty is imposed by the government.

The exclusion ratio is always considered _______% in variable annuities.

Uses of Annuities

Variable annuities never offer loan values.

The principal reason for investing in annuities is:

Fixed Annuity

Since there is no possibility of loss, the insurer bears the burden of risk in a fixed annuity.

The designated time period for an equity indexed annuity is:

Equity indexed annuities are a form of _________ annuity.

The Indexing Method means the approach used to measure the amount of change, if any, in the index. Match the most common indexing methods with their respective definitions.

a)	Index-linked interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to the annuity each year during the term.
b)	The index-linked interest, if any, is decided by looking at the index value at various points during the term, usually the annual anniversaries of the date the annuity was first purchased. The interest is based on the difference between the highest index value and the index value at the start of the term. Interest is added to the annuity at the end of the term.
c)	The index-linked interest, if any, is based on the difference between the index value at the end of the term and the index value at the start of the term. Interest is added to the annuity at the end of the term.
a) Ratcheting b) High-Water Mark c) Point-to-Point (Lesson 7.6.1.1)

Variable Annuities

The variable annuity has _____________ of growth.

The variable annuity death benefit states that if the policyowner dies within a certain time and before annuitizing the funds, the company will:

Variable annuities are subject to dual regulation by the state and the SEC as securities.

The actual number of ______ units is determined by the current value of one unit relative to the amount of premiums paid.

No one may sell variable annuities in Florida unless duly licensed and appointed as a life including variable annuity agent.

Annuity Investments by Seniors

An agent is required to maintain records relating to such transactions for:

An agent can be held responsible for a transaction wherein a consumer refuses to provide relevant information required by the agent.

LESSON 7: ANNUITIES - FIXED AND VARIABLE