Annuity – WebCE Exam Questions with
Complete Solutions Graded A+
Annuitization is - Answer: Accumulated values are converted into a stream of periodic income
payments.
How often can payments of annuities be paid out? - Answer: A specified term of years, for life,
or a combination of the two.
What is the reason (how has a consumer's priorities and needs shifted) that annuities are well
suited for late-life retirement planning? - Answer: When a consumer priorities and needs
typically shift from asset accumulation to income distribution
What is the start date range for deferred income annuities? - Answer: Anywhere from 13
months to 40 years in the future.
What is the age that Deferred Income Annuities' income start date cannot extend past? -
Answer: 85 years old.
What are Surrender Charges? - Answer: Fees the insurer assess for early withdrawals or contract
surrenders.
What is a Withdrawal Fee? - Answer: when less than the full contract value is taken.
What are the two approaches for insurers to determine the surrender charge?
What are other ways? - Answer: 1) Account Value Method
2) Premium Deposit Method
3) Market Value Adjustments
, 4) Premium Tax
What is the Premium Deposit Method of determining the surrender charge? - Answer: The
charge on the amount of the contract's invested premium, applying a percentage that usually
declines annually over the surrender charge period.
What is the Account Value Method of determining the surrender charge? - Answer: Assess a
surrender charge equal to some percentage of the contract's accumulated value.
What is Premium Tax in relation to the annuity? - Answer: A number of states impose a tax on
annuity premiums.
What does the Mortality and Expense (M&E) charge? - Answer: Assessed against the values of
the separate subaccounts and is deducted before accumulation unit values are calculated.
It helps ensure that the insurer can meet its contractual obligations for annualized income
payments and a minimum death benefit.
The cost of a variable annuity's death benefit and annuity charge plus related insurer costs (such
as agent commissions and overhead)
Which expense of a Variable Annuity, which is the most criticized? And why? - Answer: The
Mortality and Expense.
What fees are built into the Fixed Annuity Contract's interest rate? - Answer: The Commissions
it pays to its producers and distributors, its operational costs and reserve requirements, and
generates profits.
1) Commissions
2) Operational costs
Complete Solutions Graded A+
Annuitization is - Answer: Accumulated values are converted into a stream of periodic income
payments.
How often can payments of annuities be paid out? - Answer: A specified term of years, for life,
or a combination of the two.
What is the reason (how has a consumer's priorities and needs shifted) that annuities are well
suited for late-life retirement planning? - Answer: When a consumer priorities and needs
typically shift from asset accumulation to income distribution
What is the start date range for deferred income annuities? - Answer: Anywhere from 13
months to 40 years in the future.
What is the age that Deferred Income Annuities' income start date cannot extend past? -
Answer: 85 years old.
What are Surrender Charges? - Answer: Fees the insurer assess for early withdrawals or contract
surrenders.
What is a Withdrawal Fee? - Answer: when less than the full contract value is taken.
What are the two approaches for insurers to determine the surrender charge?
What are other ways? - Answer: 1) Account Value Method
2) Premium Deposit Method
3) Market Value Adjustments
, 4) Premium Tax
What is the Premium Deposit Method of determining the surrender charge? - Answer: The
charge on the amount of the contract's invested premium, applying a percentage that usually
declines annually over the surrender charge period.
What is the Account Value Method of determining the surrender charge? - Answer: Assess a
surrender charge equal to some percentage of the contract's accumulated value.
What is Premium Tax in relation to the annuity? - Answer: A number of states impose a tax on
annuity premiums.
What does the Mortality and Expense (M&E) charge? - Answer: Assessed against the values of
the separate subaccounts and is deducted before accumulation unit values are calculated.
It helps ensure that the insurer can meet its contractual obligations for annualized income
payments and a minimum death benefit.
The cost of a variable annuity's death benefit and annuity charge plus related insurer costs (such
as agent commissions and overhead)
Which expense of a Variable Annuity, which is the most criticized? And why? - Answer: The
Mortality and Expense.
What fees are built into the Fixed Annuity Contract's interest rate? - Answer: The Commissions
it pays to its producers and distributors, its operational costs and reserve requirements, and
generates profits.
1) Commissions
2) Operational costs
