A Trivia Quiz On Annuities!

15 Questions | Total Attempts: 2891

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A Trivia Quiz On Annuities!

A trivia quiz on annuities! There are different ways that people choose to invest their income and annuities are perfect answer to people who do not want to risk lacking income as they ensure after one has made their premiums they get their cash back with interest or as original based on the annuity one chooses over a period of time. Test out what more you know about these types of contract through this quiz.


Questions and Answers
  • 1. 
    What is the advantage of having a qualified annuity?
    • A. 

      There is no advantage

    • B. 

      Higher dividends

    • C. 

      The employer receives a tax deduction for the contributions

    • D. 

      Receiving a lump-sum settlement tax free

  • 2. 
    Under a Straight Life Annuity, if the annuitant dies before the principal amount is paid out, the beneficiary will receive:
    • A. 

      Guaranteed minimum benefit

    • B. 

      Nothing; the payments will cease

    • C. 

      The amount paid into the annuity

    • D. 

      The remainder of the principal

  • 3. 
    A prospective Deferred Annuity owner is concerned about what would happen if the surrendered the annuity before the annuitization period. The agent most likely explained which of the following?
    • A. 

      The owner will receive some of the money back, which will depend on the surrender value established by the insurer at the time that the contract is terminated

    • B. 

      It is not possible to surrender an annuity before the annuitization period.

    • C. 

      Non-Forfeiture Option guarantees that the owner will receive a surrender value of the contract

    • D. 

      The insurance company will apply the money to another annuity or a Life Insurance policy, but the money cannot be returned

  • 4. 
    The period of time during which payments earn interest and grow tax-deferred is called:
    • A. 

      Pay-out period

    • B. 

      Pay in-period

    • C. 

      Liquidation Period

    • D. 

      Annuitization period

  • 5. 
    An annuity is payable for as long as the annuitant lives, and upon death, all the payments cease. This is which Payment Option?
    • A. 

      Life Income Joint and Survivor Option

    • B. 

      Life Income Option

    • C. 

      Joint Life Option

    • D. 

      Life Income with Refund Option

  • 6. 
    What is incorrect regarding annuities?
    • A. 

      Annuities do not use the pooling technique to spread risk

    • B. 

      An owner may change the annuity date, the beneficiary, or the settlement option

    • C. 

      Once the payout period begins, the annuitant recieves periodic payments

    • D. 

      The accumulation period is the period prior to the annuitzation date

  • 7. 
    All are characteristics of annuities, except:
    • A. 

      Annuities may use a beneficiary designationin case of the annuitant's death

    • B. 

      Premature distributions are subject to a 15% penalty tax in order to discourage the use of annuity contracts as a short-term tax shelter.

    • C. 

      Owners of individual annuities have contracted rights beginning at the time of purchase.

    • D. 

      Business Corporations may use annuities to provide pensions for employees, either nonqualified or qualified plans, or to structure payments of liability settlements.

  • 8. 
    Mr. Brown received monthly benefits from his annuity, and upon death, Mrs. Brown receives a reduced amount.  What annuity payment option did Mr. Smith choose?
    • A. 

      Cash refund

    • B. 

      Life Income

    • C. 

      Joint and Survivorship

    • D. 

      Minimum Distribution

  • 9. 
    What is the greatest marketable benefit of a Flexible Premium Deferred Annuity?
    • A. 

      Tax Deferment

    • B. 

      Contributions may be as often and as large as the owner desires

    • C. 

      The owner may cancel at anytime

    • D. 

      Surrender charges could occur if cancelled in early years

  • 10. 
    The payment option that pays an income for the life of the annuitant or for a specified period, whichever occurs last, is
    • A. 

      Temporary Annuity

    • B. 

      Life income

    • C. 

      Life income with Period Certain

    • D. 

      Life income with refund

  • 11. 
    What is not a trait of a Fixed Annuity?
    • A. 

      The insurer's assets guarantee the fixed annuity contract

    • B. 

      The purchasing power of a fixed amount decreases as the cost of living increases

    • C. 

      It must include a projected schedule of cash availability on its anniversary date, for a minimium of 10 years

    • D. 

      The insurere bears any investment risk.

  • 12. 
    Which would be incorrect regarding a Variable Annuity?
    • A. 

      Upon annuitization, the accumaltion units are converted to annuity units. The income is paid based on the valueof the units.

    • B. 

      The contract owner bears the investment risk and recieves the return actually earned on invested assets, less any charges assesses by the insurer.

    • C. 

      Premiums paid during the accumlation period are invested in a seperate account(s).

    • D. 

      The number of annuity units recieved, and the unit value, remain level.

  • 13. 
    You purchase an annuity in December and begin receiving monthly benefits in May.  What type of annuity do you own?
    • A. 

      Retirement Annuity

    • B. 

      Single Premium IRA

    • C. 

      Single Premium Immediate Annuity

    • D. 

      Tax Sheltered Annuity

  • 14. 
    An annuity purchased 10 years ago would have some value at this time.  The accumulation units may now be converted to annuity units.  What type of annuity is this?
    • A. 

      Fixed

    • B. 

      Ten year Certain

    • C. 

      Variable

    • D. 

      Taxable Annuity

  • 15. 
    Which of the following best defines the Cost Recovery Rule?
    • A. 

      The cash value, plus the sum of the premiums paid, equals the equity in the contract.

    • B. 

      The face amount, less the cash value, equals the equity in the contract

    • C. 

      The face amount, plus the cash value, equals the equity in the contract.

    • D. 

      The cash value, minus the sum of the premiums paid, equals the equity in the contract.