Michigan- Annuities || Graded A+ Already.
Annuity correct answers is a contract that provides income for a specified period of years, or for
life. An annuity protects a person against outliving his or her
money. Annuities are not life insurance, but rather a vehicle for the accumulation of money and
the liquidation of an estate. Annuities are marketed by life insurance companies. Licensed life
insurance agents are authorized to sell some types of annuities. Annuities do not pay a face
amount upon the death of the annuitant. In fact, they do just the opposite. In most cases, the
payments stop upon the death of the annuitant.
Mortality Tables correct answers Annuities use mortality tables, but these tables reflect a longer
life expectancy than the mortality tables used for life insurance.
Morality Tables indicate the number of individuals within a specified group (e.g. males, females,
smokers, nonsmokers) starting at a certain age, who are expected to be alive at a succeeding age.
Owner correct answers The purchaser of the annuity contract, but not necessarily the one who
receives the benefits. The owner of the annuity has all of the rights, such as naming the
beneficiary and surrendering the annuity. The owner of an annuity may be a corporation, trust, or
other legal entity.
Annuitant correct answers The person who receives benefits or payments from the annuity,
whose life expectancy is taken into consideration, and for whom the annuity is written. The
annuitant and the contract owner do not need to be the same person, but most often are. A
corporation, trust or other legal entity may own an annuity, but the annuitant must be a natural
person.
Beneficiary correct answers The person who receives annuity assets (either the amount paid into
the annuity or the cash value, whichever is greater) if the annuitant dies during the accumulation
period, or to whom the balance of annuity benefits is paid out.
Accumulation Period or Pay-in Period correct answers is the period of time over which the
owner makes payments (premiums) into an annuity. Furthermore, it is the period of time during
which the payments earn interest on a tax-deferred basis.
Annuity Period or Pay-out Period correct answers is the time during which the sum that has been
accumulated during the accumulation period is converted into a stream of income payments to
the annuitant. The annuity period may last for the lifetime of the annuitant or for a specified
period, which could be longer or shorter. The annuitization date is the time when the annuity
benefit payouts begin (trigger for benefits).
Annuity Income Amount is Based Upon What? correct answers -The amount of premium paid or
cash value accumulated;
-The frequency of the payment;
, -The interest rate;
-The annuitant's age and gender.
Example- Annuitant correct answers An annuitant whose life expectancy is longer will have
smaller income installments. For example, all other factors being equal, a 65-year-old male will
have higher annuity income payments than a 45-year-old male (because he is younger), or than a
65-year-old female (because women statistically have a longer life expectancy).
If an Annuitant Dies During the Accumulation Period correct answers the insurer is obligated to
return to the beneficiary either the cash value or the total premiums paid, whichever is greater. If
a beneficiary is not named, the benefit will be paid to the annuitant's estate.
Annuities can be classified according to how premiums are paid into the annuity, how premiums
are invested, and when and how benefits are paid out.
2 Premium Payment Options to Classify Annuities based on how they can be funded (paid for)
correct answers -a single payment (lump sum)
-Periodic payments in which the premiums are paid in installments over a period of time.
Periodic payment annuities can be either level premium, in which the annuitant/owner pays a
fixed installment, or flexible premium, in which the amount and frequency of each installment
varies.
Immediate Vs. Deferred Annuities correct answers Annuities can also be classified according to
when the income payments from the annuity begin.
Immediate Annuity correct answers is one that is purchased with a single, lump-sum payment
and provides income payments that start within one year from the date of purchase. Typically, an
immediate annuity will make the first payment as early as 1 month from the purchase date. Most
commonly, this type of annuity is known as a Single Premium Immediate Annuity (SPIA).
Deferred Annuity correct answers is an annuity in which the income payments begin sometime
after one year from the date of purchase. Deferred annuities can be funded with either a single
lump sum (Single Premium Deferred Annuities - SPDAs) or through periodic payments (Flexible
Premium Deferred Annuities - FPDAs). Periodic payments can vary from year to year. The
longer the annuity is deferred, the more flexibility for payment of premiums it allows.
Nonforfeiture correct answers A deferred annuity has a guaranteed surrender value that is
available if the owner decides to surrender the annuity prior to annuitization (e.g. 100% of the
premium paid, less any prior withdrawals and related surrender charges). However, a 10%
penalty will be applied for early withdrawals (prior to age 59 1⁄2).
Surrender Charges correct answers The purpose of the surrender charge is to help compensate
the company for loss of the investment value due to an early surrender of a deferred annuity.
A surrender charge is levied against the cash value, and is generally a percentage that reduces
over time. A common surrender charge might be 7% the first year, 6% the second year, and 5%,
Annuity correct answers is a contract that provides income for a specified period of years, or for
life. An annuity protects a person against outliving his or her
money. Annuities are not life insurance, but rather a vehicle for the accumulation of money and
the liquidation of an estate. Annuities are marketed by life insurance companies. Licensed life
insurance agents are authorized to sell some types of annuities. Annuities do not pay a face
amount upon the death of the annuitant. In fact, they do just the opposite. In most cases, the
payments stop upon the death of the annuitant.
Mortality Tables correct answers Annuities use mortality tables, but these tables reflect a longer
life expectancy than the mortality tables used for life insurance.
Morality Tables indicate the number of individuals within a specified group (e.g. males, females,
smokers, nonsmokers) starting at a certain age, who are expected to be alive at a succeeding age.
Owner correct answers The purchaser of the annuity contract, but not necessarily the one who
receives the benefits. The owner of the annuity has all of the rights, such as naming the
beneficiary and surrendering the annuity. The owner of an annuity may be a corporation, trust, or
other legal entity.
Annuitant correct answers The person who receives benefits or payments from the annuity,
whose life expectancy is taken into consideration, and for whom the annuity is written. The
annuitant and the contract owner do not need to be the same person, but most often are. A
corporation, trust or other legal entity may own an annuity, but the annuitant must be a natural
person.
Beneficiary correct answers The person who receives annuity assets (either the amount paid into
the annuity or the cash value, whichever is greater) if the annuitant dies during the accumulation
period, or to whom the balance of annuity benefits is paid out.
Accumulation Period or Pay-in Period correct answers is the period of time over which the
owner makes payments (premiums) into an annuity. Furthermore, it is the period of time during
which the payments earn interest on a tax-deferred basis.
Annuity Period or Pay-out Period correct answers is the time during which the sum that has been
accumulated during the accumulation period is converted into a stream of income payments to
the annuitant. The annuity period may last for the lifetime of the annuitant or for a specified
period, which could be longer or shorter. The annuitization date is the time when the annuity
benefit payouts begin (trigger for benefits).
Annuity Income Amount is Based Upon What? correct answers -The amount of premium paid or
cash value accumulated;
-The frequency of the payment;
, -The interest rate;
-The annuitant's age and gender.
Example- Annuitant correct answers An annuitant whose life expectancy is longer will have
smaller income installments. For example, all other factors being equal, a 65-year-old male will
have higher annuity income payments than a 45-year-old male (because he is younger), or than a
65-year-old female (because women statistically have a longer life expectancy).
If an Annuitant Dies During the Accumulation Period correct answers the insurer is obligated to
return to the beneficiary either the cash value or the total premiums paid, whichever is greater. If
a beneficiary is not named, the benefit will be paid to the annuitant's estate.
Annuities can be classified according to how premiums are paid into the annuity, how premiums
are invested, and when and how benefits are paid out.
2 Premium Payment Options to Classify Annuities based on how they can be funded (paid for)
correct answers -a single payment (lump sum)
-Periodic payments in which the premiums are paid in installments over a period of time.
Periodic payment annuities can be either level premium, in which the annuitant/owner pays a
fixed installment, or flexible premium, in which the amount and frequency of each installment
varies.
Immediate Vs. Deferred Annuities correct answers Annuities can also be classified according to
when the income payments from the annuity begin.
Immediate Annuity correct answers is one that is purchased with a single, lump-sum payment
and provides income payments that start within one year from the date of purchase. Typically, an
immediate annuity will make the first payment as early as 1 month from the purchase date. Most
commonly, this type of annuity is known as a Single Premium Immediate Annuity (SPIA).
Deferred Annuity correct answers is an annuity in which the income payments begin sometime
after one year from the date of purchase. Deferred annuities can be funded with either a single
lump sum (Single Premium Deferred Annuities - SPDAs) or through periodic payments (Flexible
Premium Deferred Annuities - FPDAs). Periodic payments can vary from year to year. The
longer the annuity is deferred, the more flexibility for payment of premiums it allows.
Nonforfeiture correct answers A deferred annuity has a guaranteed surrender value that is
available if the owner decides to surrender the annuity prior to annuitization (e.g. 100% of the
premium paid, less any prior withdrawals and related surrender charges). However, a 10%
penalty will be applied for early withdrawals (prior to age 59 1⁄2).
Surrender Charges correct answers The purpose of the surrender charge is to help compensate
the company for loss of the investment value due to an early surrender of a deferred annuity.
A surrender charge is levied against the cash value, and is generally a percentage that reduces
over time. A common surrender charge might be 7% the first year, 6% the second year, and 5%,
