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11 Cards in this Set
- Front
- Back
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An annuity which is backed by a life insurer's separate account is called |
Variable account |
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The systematic liquidation of a sum of money is provided by a(n) |
annuity |
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An annuitant would like to determine the amount of an annuity distribution that is exempt from taxation. What is used to calculate this? |
Exclusion ratio |
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Cindy buys a 10-year certain annuity with an installment refund. After receiving monthly payments for 5 years, Cindy dies. How many remaining payments will the insurer make to her beneficiary? |
60 payments. The installment refund option guarantees that the total annuity fund will be paid to the annuitant or to the annuitant's beneficiary. In this situation, the annuitant dies 5 years into a 10-year certain annuity. This leaves the remaining 5 years (60 monthly payments) payable to her beneficiary. |
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Victoria owns a life annuity and elects to receive annuity payments monthly for the remainder of her life with "ten years certain". Her annuity will make payments |
for a minimum of 120 months and a maximum of the remainder of her life |
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An annuitant would like to determine the current value of her annuity. To do this, she multiplies the number of "accumulation units" she owns times the unit value of the "separate account". What kind of annuity BEST matches this description? |
Variable annuity. A variable annuity holds its investments in an insurer's separate account, as opposed to the insurer's general account. These separate accounts usually hold non-guaranteed equity investments such as stocks and mutual funds. Variable annuities shift the investment risk from the insurer to the annuity owner |
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A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a(n) |
deferred annuity. A savings vehicle designed to first accumulate funds and then systematically liquidates the funds is called a deferred annuity. |
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What is a common reason people purchase an annuity? |
To protect against the risk of outliving their financial resources. One common reason for purchasing an annuity is to protect against the risk of outliving financial resources. |
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What distinguishes a deferred annuity from an immediate annuity? |
The time at which benefit payments start". The difference between deferred and immediate annuities is when annuity benefit payments begin. |
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What kind of annuity pays income to two annuitants until their deaths? |
Joint and survivor annuity". A joint and survivor annuity provides for payment of the annuity to two people. If either person dies, the same income payments continue to the survivor for life. When the surviving annuitant dies, no further payments are made to anyone. |
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Features of equity-indexed annuities |
Offers long term inflation protection, Offers a minimum guaranteed rate, Offers protection during a decline in the stock market |
