Annuity Suitability and Best Interest Standards
Exam WebCE-EXAM STUDY GUIDE ACCURATE
QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES || 100%
GUARANTEED PASS <BRAND NEW VERSION>
For whom is joint ownership of an annuity often reserved?
spouses
At what point does the beneficiary to an annuity acquire rights in the contract?
(Wrong) upon contract issue and throughout the life of the contract, until the death of the
contract owner or annuitant
Generally speaking, how long is the accumulation period for immediate annuities?
one month to one year
For which of the following needs are traditional deferred annuities best suited?
retirement planning
For what reason would an individual choose a variable annuity over a fixed annuity?
for the potential to earn greater contract growth
At the time he purchased his variable annuity, Ahmed directed $5,000 of his premium into
Subaccount A when the unit value was $10. A year later, the unit value had increased to $15.
Assuming he made no additional premium deposits, what is the value of Ahmed's investment
in Subaccount A now?
$7,500
For most indexed annuities, what is the specified floor?
0 percent
Which feature of indexed annuities prevents any negative index returns from affecting the
contract's previously credited and accumulated values?
,the floor
At the age of 42, Steve purchased a fixed deferred annuity from Mega Mutual Life with a
single premium deposit of $10,000. The declared interest rate on Steve's contract when it was
issued was 5 percent, and the contract guarantees a minimum rate of 3 percent. The initial
declared rate is payable for two years; the renewal rate for year three and later is subject to
change. How much interest will be credited to Steve's contract at the end of year one?
$500
For an indexed annuity, what is credited to the contract at the end of each interest crediting
term?
(Wrong) the index interest rate
Darcy owns an indexed annuity. The index that supports her annuity was at 1000 when the
contract's interest crediting period began and 1200 when the crediting period ended. What is
the index increase?
20 percent
What covers the cost of a variable annuity's death benefit?
the mortality and expense charge
Ten years ago, John purchased a deferred annuity and named his daughter, Suzanne, as
beneficiary. Over the years, John invested $50,000 in the contract; upon his death, the
contract was valued at $118,000. Assuming that John died without annuitizing and the
contract contained the standard death benefit provision, how much will Suzanne receive?
$118,000
At what point are a nonqualified annuity's earnings subject to income tax?
when they are withdrawn from the contract
All of the following are common modal annuitization payout options EXCEPT:
lump-sum
Troy purchased a deferred annuity for $100,000, naming himself and his wife as joint
annuitants and his daughter, Trudy, as beneficiary. Ten years later, the contract had grown to
$235,000, and Troy decided to annuitize under a joint and survivor life payout. He and his wife
had received income totaling $50,000 when Troy died. How much will daughter Trudy receive
at Troy's death?
, (Wrong) $180,000
The exchange of one annuity contract for another is a tax-free transaction under the rules of:
annuitization
What is the process of converting an annuity's accumulated value into a periodic income
stream?
IRC Section 1035
Which of the following correctly describes the basic income tax treatment of nonqualified
annuities?
Contract principal is not subject to taxation; interest earnings are subject to taxation.
Lorraine invested $50,000 in a nonqualified deferred annuity at the age of 50. Three years
later, the contract has grown to $64,000, and Lorraine takes a $5,000 withdrawal. The contract
is still in its accumulation stage. Which of the following statements is true?
(Wrong) $1,000 of the withdrawal is taxable; $4,000 is tax free.
Which of the following is necessary in order to meet the care obligation?
developing a consumer profile that defines the consumer's financial situation, insurance needs,
and financial objectives
What is the overriding purpose of the 2020 version of the NAIC's Suitability in Annuity
Transactions Model Regulation?
to require producers and insurers to act in the best interest of the consumer
For what primary reason must Annuity Producer Gene collect information and create a
consumer profile?
so that Gene can evaluate the customer's needs and objectives and analyze annuity products
that will best serve these needs and objectives
Which of the following annuity producers has no obligation to the consumer?
Donny conducts and completes a fact-finding interview with a prospect, but does not make any
recommendation for an annuity purchase.
Brad is a registered representative with a broker-dealer and is licensed to sell fixed and
variable annuities, as well as mutual funds. How can Brad comply with the best interest
requirements under the NAIC's annuity model regulation?
Exam WebCE-EXAM STUDY GUIDE ACCURATE
QUESTIONS AND CORRECT DETAILED
ANSWERS WITH RATIONALES || 100%
GUARANTEED PASS <BRAND NEW VERSION>
For whom is joint ownership of an annuity often reserved?
spouses
At what point does the beneficiary to an annuity acquire rights in the contract?
(Wrong) upon contract issue and throughout the life of the contract, until the death of the
contract owner or annuitant
Generally speaking, how long is the accumulation period for immediate annuities?
one month to one year
For which of the following needs are traditional deferred annuities best suited?
retirement planning
For what reason would an individual choose a variable annuity over a fixed annuity?
for the potential to earn greater contract growth
At the time he purchased his variable annuity, Ahmed directed $5,000 of his premium into
Subaccount A when the unit value was $10. A year later, the unit value had increased to $15.
Assuming he made no additional premium deposits, what is the value of Ahmed's investment
in Subaccount A now?
$7,500
For most indexed annuities, what is the specified floor?
0 percent
Which feature of indexed annuities prevents any negative index returns from affecting the
contract's previously credited and accumulated values?
,the floor
At the age of 42, Steve purchased a fixed deferred annuity from Mega Mutual Life with a
single premium deposit of $10,000. The declared interest rate on Steve's contract when it was
issued was 5 percent, and the contract guarantees a minimum rate of 3 percent. The initial
declared rate is payable for two years; the renewal rate for year three and later is subject to
change. How much interest will be credited to Steve's contract at the end of year one?
$500
For an indexed annuity, what is credited to the contract at the end of each interest crediting
term?
(Wrong) the index interest rate
Darcy owns an indexed annuity. The index that supports her annuity was at 1000 when the
contract's interest crediting period began and 1200 when the crediting period ended. What is
the index increase?
20 percent
What covers the cost of a variable annuity's death benefit?
the mortality and expense charge
Ten years ago, John purchased a deferred annuity and named his daughter, Suzanne, as
beneficiary. Over the years, John invested $50,000 in the contract; upon his death, the
contract was valued at $118,000. Assuming that John died without annuitizing and the
contract contained the standard death benefit provision, how much will Suzanne receive?
$118,000
At what point are a nonqualified annuity's earnings subject to income tax?
when they are withdrawn from the contract
All of the following are common modal annuitization payout options EXCEPT:
lump-sum
Troy purchased a deferred annuity for $100,000, naming himself and his wife as joint
annuitants and his daughter, Trudy, as beneficiary. Ten years later, the contract had grown to
$235,000, and Troy decided to annuitize under a joint and survivor life payout. He and his wife
had received income totaling $50,000 when Troy died. How much will daughter Trudy receive
at Troy's death?
, (Wrong) $180,000
The exchange of one annuity contract for another is a tax-free transaction under the rules of:
annuitization
What is the process of converting an annuity's accumulated value into a periodic income
stream?
IRC Section 1035
Which of the following correctly describes the basic income tax treatment of nonqualified
annuities?
Contract principal is not subject to taxation; interest earnings are subject to taxation.
Lorraine invested $50,000 in a nonqualified deferred annuity at the age of 50. Three years
later, the contract has grown to $64,000, and Lorraine takes a $5,000 withdrawal. The contract
is still in its accumulation stage. Which of the following statements is true?
(Wrong) $1,000 of the withdrawal is taxable; $4,000 is tax free.
Which of the following is necessary in order to meet the care obligation?
developing a consumer profile that defines the consumer's financial situation, insurance needs,
and financial objectives
What is the overriding purpose of the 2020 version of the NAIC's Suitability in Annuity
Transactions Model Regulation?
to require producers and insurers to act in the best interest of the consumer
For what primary reason must Annuity Producer Gene collect information and create a
consumer profile?
so that Gene can evaluate the customer's needs and objectives and analyze annuity products
that will best serve these needs and objectives
Which of the following annuity producers has no obligation to the consumer?
Donny conducts and completes a fact-finding interview with a prospect, but does not make any
recommendation for an annuity purchase.
Brad is a registered representative with a broker-dealer and is licensed to sell fixed and
variable annuities, as well as mutual funds. How can Brad comply with the best interest
requirements under the NAIC's annuity model regulation?
