VIRGINIA BILLBOARD SIGN
CONTRACTING EXAMINATION FINAL
PAPER QUESTIONS SOLUTIONS
GRADED A+
◉ What annuity settlement option produces the largest monthly
income guaranteed for life? Answer: pure life settlement option
◉ second life contingency option. Answer: life with period certain
(ie. 10 years) so even if the annuitant does or does not die within
that timeframe, insurer guarantees to continue the annuity
payments to a named beneficiary for the balance of the certain
period.
◉ third life contingency option. Answer: life with refund; insurer
guarantees payments for life, but if the annuitant dies before the
payments received equal the annuitant's basis (the total amount
paid for the annuity), then the insurer agrees to pay out the
remaining basis to a named beneficiary
◉ which annuity settlement option provides the largest monthly
income payment?
a. life with period certain
b. pure life option
c. life with refund Answer: b
,◉ how long is the free-look period for Michigan annuity contracts
Answer: 10 calendar days after purchase date (eligible for full
refund including premium paid)
◉ accumulation period/units Answer: a $5,000 prem deposit in a VA
in which the units are valued at $5, would purchase 1,000
accumulation units. New prem pmts change the number of
accumulation units in a purchaser's account, and market
fluctuations change each unit's value, so remember that both the
number and value of accumulation units change
◉ annuity period/units Answer: when annuitized, accumulation
units are converted to a set number of annuity units; this number
becomes one of the factors used to calculate the payout each month
during the annuity phase (once the # of annuity units is chosen, it
will not change, but the value of each unit change)
◉ Assumed Interest Rate (AIR) Answer: arbitrary rate of return set
by the insurer for any separate account they establish; VA owner ust
experience a separate account net investment rate of return that
exceeds the AIR in order for those product values to go up
◉ Applying AIR to variable life Answer: applies to the variable death
benefit, but not var. cash value (only a separate account return above
the AIR would increase the variable policy death benefit)
, ◉ Applying AIR to variable annuity Answer: applies to the variable
annuity unit value and any payouts, but not o the variable
accumulation value (only a separate account return above the AIR
would increase the variable annuity unit values and pmts)
◉ Combination Annuities Answer: Combo offers features of fixed
and variable contracts
-Fixed portion offers guaranteed rate
-Variable portion tries to achieve higher rate of return
-$ in fixed portion goes to general account for conservative
investment
-$ in variable portion goes to separate account for stocks, bond,
mutual funds
-Reps must have securities and insurance licenses
◉ Guaranteed living benefits (GLB) Answer: Accumulation, income,
and withdrawal guarantee features of annuities; attractive to older
and conservative consumers
◉ guaranteed minimum account value (GMAV) Answer: variable
annuity guaranteed life benefit that ensures the contract's account
value will be the greater of the premiums paid or the actual account
value after a specified period of time, such as 8 or 10 years
CONTRACTING EXAMINATION FINAL
PAPER QUESTIONS SOLUTIONS
GRADED A+
◉ What annuity settlement option produces the largest monthly
income guaranteed for life? Answer: pure life settlement option
◉ second life contingency option. Answer: life with period certain
(ie. 10 years) so even if the annuitant does or does not die within
that timeframe, insurer guarantees to continue the annuity
payments to a named beneficiary for the balance of the certain
period.
◉ third life contingency option. Answer: life with refund; insurer
guarantees payments for life, but if the annuitant dies before the
payments received equal the annuitant's basis (the total amount
paid for the annuity), then the insurer agrees to pay out the
remaining basis to a named beneficiary
◉ which annuity settlement option provides the largest monthly
income payment?
a. life with period certain
b. pure life option
c. life with refund Answer: b
,◉ how long is the free-look period for Michigan annuity contracts
Answer: 10 calendar days after purchase date (eligible for full
refund including premium paid)
◉ accumulation period/units Answer: a $5,000 prem deposit in a VA
in which the units are valued at $5, would purchase 1,000
accumulation units. New prem pmts change the number of
accumulation units in a purchaser's account, and market
fluctuations change each unit's value, so remember that both the
number and value of accumulation units change
◉ annuity period/units Answer: when annuitized, accumulation
units are converted to a set number of annuity units; this number
becomes one of the factors used to calculate the payout each month
during the annuity phase (once the # of annuity units is chosen, it
will not change, but the value of each unit change)
◉ Assumed Interest Rate (AIR) Answer: arbitrary rate of return set
by the insurer for any separate account they establish; VA owner ust
experience a separate account net investment rate of return that
exceeds the AIR in order for those product values to go up
◉ Applying AIR to variable life Answer: applies to the variable death
benefit, but not var. cash value (only a separate account return above
the AIR would increase the variable policy death benefit)
, ◉ Applying AIR to variable annuity Answer: applies to the variable
annuity unit value and any payouts, but not o the variable
accumulation value (only a separate account return above the AIR
would increase the variable annuity unit values and pmts)
◉ Combination Annuities Answer: Combo offers features of fixed
and variable contracts
-Fixed portion offers guaranteed rate
-Variable portion tries to achieve higher rate of return
-$ in fixed portion goes to general account for conservative
investment
-$ in variable portion goes to separate account for stocks, bond,
mutual funds
-Reps must have securities and insurance licenses
◉ Guaranteed living benefits (GLB) Answer: Accumulation, income,
and withdrawal guarantee features of annuities; attractive to older
and conservative consumers
◉ guaranteed minimum account value (GMAV) Answer: variable
annuity guaranteed life benefit that ensures the contract's account
value will be the greater of the premiums paid or the actual account
value after a specified period of time, such as 8 or 10 years
