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WorksheetsCh. 5 Annuities Quiz
Total questions: 25
Worksheet time: 13mins
What is the primary purpose of an annuity?
To protect against premature death
To provide a steady stream of lifetime income
To provide a death benefit upon the insured's death
To accumulate funds for education
How does an annuity differ from life insurance?
An annuity provides a benefit upon death of the insured
An annuity creates an estate
An annuity pays a death benefit
An annuity protects against living too long
Who is the owner of an annuity contract?
The individual or person named in the contract to potentially receive benefits
The individual whose life the contract is based upon
The individual who controls the contract and is responsible for making payments
The individual who assumes ownership of the annuity upon the death of the annuitant
What is the accumulation period of an annuity?
The period of time from the first deposit to the selection of a settlement option
The period of time during which taxes are deferred
The period of time when the annuitant receives lifetime income
The period of time when annuity payments are made
What is the difference between an immediate annuity and a deferred annuity?
An immediate annuity pays benefits within 1 year from the issue date
A deferred annuity pays benefits within 1 year from the issue date
An immediate annuity has a longer accumulation period
A deferred annuity has a longer accumulation period
What happens to the cash value of an annuity during the accumulation period?
It is used to purchase life insurance
It grows tax deferred
It is paid out as a lump sum
It is subject to income tax and a penalty
What is the payout option that provides an annuity for as long as the annuitant lives?
Life Income with Refund
Joint Life
Life Income Period Certain
Life Income Joint & Survivor
What is the classification of an annuity that guarantees a minimum fixed interest rate?
Market-Value Adjustment Annuity
Variable Annuity
Indexed Annuity
Fixed Annuity
What is the tax treatment of a qualified annuity?
Contributions are not tax deductible and distributions are tax-free
Contributions are tax deductible and distributions are taxable
Contributions are tax deductible and distributions are tax-free
Contributions are not tax deductible and distributions are taxable
What is a common business use of annuities?
Funding nonqualified deferred compensation plans
Funding education expenses
Purchasing life insurance
Providing long-term care benefits
What is the primary benefit of a deferred annuity?
Immediate payout after purchase
Accumulation of interest during the deferral period
Protection against premature death
Guaranteed minimum interest rate
What is the main advantage of a variable annuity?
Guaranteed fixed interest rate
Potential for higher returns based on market performance
Immediate payout after purchase
Protection against living too long
What is the tax treatment of non-qualified annuity distributions?
Contributions are tax deductible and distributions are tax-free
Contributions are not tax deductible and distributions are tax-free
Contributions are tax deductible and distributions are taxable
Contributions are not tax deductible and distributions are taxable
What is the main disadvantage of a variable annuity?
Guaranteed fixed interest rate
Potential for lower returns based on market performance
Delayed payout after purchase
Risk of losing money
What is the classification of an annuity that does not guarantee a minimum fixed interest rate?
Market-Value Adjustment Annuity
Variable Annuity
Indexed Annuity
Fixed Annuity
What is the secondary purpose of an annuity?
To protect against premature death
To provide a steady stream of lifetime income
To provide a death benefit upon the insured's death
To accumulate funds for retirement
What is the main risk associated with a variable annuity?
Guaranteed fixed interest rate
Loss of principal due to market fluctuations
Immediate payout after purchase
Protection against living too long
What is the main benefit of an immediate annuity?
Immediate payout after purchase
Accumulation of interest during the deferral period
Protection against premature death
Guaranteed minimum interest rate
What is the tax treatment of a non-qualified annuity?
Contributions are tax deductible and distributions are tax-free
Contributions are not tax deductible and distributions are tax-free
Contributions are tax deductible and distributions are taxable
Contributions are not tax deductible and distributions are taxable
What is the main disadvantage of a fixed annuity?
Guaranteed fixed interest rate
Potential for lower returns based on market performance
Delayed payout after purchase
Risk of losing money
What is the main advantage of an immediate annuity?
Immediate payout after purchase
Accumulation of interest during the deferral period
Protection against premature death
Guaranteed minimum interest rate
What is the tax treatment of a qualified annuity distributions?
Contributions are tax deductible and distributions are tax-free
Contributions are not tax deductible and distributions are tax-free
Contributions are tax deductible and distributions are taxable
Contributions are not tax deductible and distributions are taxable
What feature of certain annuities allows for participation in market gains while protecting against market losses?
Guaranteed minimum withdrawal benefit
Fixed interest rate provision
Market-Value Adjustment feature
Principal protection feature
What type of annuity payout option provides payments for a specified period regardless of whether the annuitant lives or dies?
Life Income with Period Certain
Joint and Survivor Annuity
Life Annuity with Refund
Period Certain Annuity
What is the primary purpose of adding a cost of living adjustment (COLA) rider to an annuity?
To protect against inflation eroding the purchasing power of payments
To guarantee a minimum interest rate
To increase the death benefit
To allow for early withdrawal without penalties
