must provide full and fair disclosure. C)I and IV. D)suggest to the client that perhaps a loan or refinancing his vacation home might be a better way to fund the contract purchase. This would not align with the couple's criteria for coverage as long as they both live. The holder of a VA receives the largest monthly payments under which of the following payout options? Question #36 of 48Question ID: 606805 Reference: 12.3.3 in the License Exam. A)I and IV. In addition, an element of risk must be present. can be sold by someone with an insurance license only. Question #16 of 48Question ID: 606807 D)I and III. The owner of a life annuity with 10-year period certain will receive payments for life, subject to a minimum of 10 years. They are also riddled with fees, which can cut into profits. It credits a minimum rate of interest, just as a fixed annuity does, but its value is also based on the performance of a specified stock indexusually computed as a fraction of that indexs total return. Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. C)the number of annuity units is fixed, and their value remains fixed. required to be located off of the company's premises. Future annuity payments will vary according to the separate account's performance. Her agent recommended she choose a variable annuity as a safe haven for the funds. Single premium annuities are often funded by rollovers or from the sale of an appreciated asset. C)100% tax deferred. In March, the actual net return to the separate account was 8%. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. D)an accounting measure used to determine payments to the owner of the variable annuity. Annuities are financial products intended to enhance retirement security. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. VA contracts must be sold by prospectus due to the characterization of the separate accounts as securities, which must be registered under the Securities Act of 1933 & the Investment Co. Act of 1940. If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? However, it does guarantee payments for life (mortality). None of the other investments listed here offer tax-deferred growth. The growth of the annuitys value and/or the benefits paid does not depend directly or entirely on the performance of the investments the insurance company makes to support the annuity. D)I and IV, Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. In the case of deferred annuities, this is often referred to as the accumulation phase. An investor who has purchased a nonqualified variable annuity has the right to: Which of the following statements regarding variable annuities are TRUE? Reference: 12.3.3 in the License Exam. Fixed annuities, on the other hand, provide a guaranteed return. The growth portion is taxed as a capital gain. An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is: Your answer, changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices., was correct!. C)such an annuity is designed to combat inflation risk. B)a minimum rate of return is guaranteed. The downside was that the buyer was exposed to market risk, which could result in losses. do not have a separate account Question #15 of 48Question ID: 606804 With variable annuities, the rate of returnand therefore the value of your investmentmight go up or down depending on the performance of the stock, bond and money market funds that you choose as investment options. The number of annuity units becomes fixed when the contract is annuitized; it is the value of each unit that fluctuates. A life with period certain contract guarantees payments for a specified number of years to a named beneficiary if the annuitant dies during that time. The following annuities are available in fixed or variable form: 1. C)III and IV. If the separate account of a variable annuity with an AIR of 4% had actual net earnings of 8% in March, the April payment will be higher than the March payment. This factor is used to establish the dollar amount of the first annuity payment. Qualified Longevity Annuity Contract (QLAC): Definition, Taxes, and Example, Present Value of an Annuity: Meaning, Formula, and Example, Future Value of an Annuity: What Is It, Formula, and Calculation, Calculating Present and Future Value of Annuities, Annuity Table: Overview, Examples, and Formulas, Present Value Interest Factor of Annuity (PVIFA) Formula, Tables. Deferred annuities A deferred annuity is designed to collect premiums and accrue investment income over an extended period for payout at a later timefor example, when an individual retires. When the first party dies, the annuity payment is made to the survivor. [C]The portfolio is professionally managed. Reference: 12.3.1 in the License Exam. A separate account will invest in a number of different securities. First, they are complicated, as insurers use different methods to calculate the index return. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: Your answer, the payout plans provide the client income for life., was correct!. Distribution can take place before or during any solicitation for sale. All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: A)the client assumes the investment risk. . D) The investment risk is shared between the insurance company and the policyowner. B.The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate. Registration with FINRA is de facto registration with the SEC; no registration is required by the state banking commission. (The exception is the fixed income annuity, which has a moderate to high payout that rises as the annuitant ages). A variable annuity's separate account is: The separate account is used for both variable life insurance and variable annuity investments. Reference: 12.1.2 in the License Exam, Question #39 of 48Question ID: 721469 We also reference original research from other reputable publishers where appropriate. Under the terms of the plan, money paid into the annuity is not included in taxable income for the year in which it is paid. Fixed annuities are not considered securities as return is guaranteed by the insurance company issuer. A)100% tax free. C)Keogh plans. B)a lifetime withdrawal benefit (LWB) or lifetime income benefit will make a periodic payment even if the account balance falls to zero Variable Annuities Flashcards - Cram.com D)Dow Jones Industrial Average. A)the number of annuity units becomes fixed when the contract is annuitized. Sub accounts and mutual funds are conceptually. D)Variable annuity. Your answer, Life annuity., was correct!. A)It will stay the same. All of the following investment strategies offer either fully or partially tax-deductible contributions to individuals who meet eligibility requirements EXCEPT: Your answer, variable annuities., was correct!. a life insurance holder dies sooner than expected. As part of the registration requirements, a prospectus must be filed & distributed to prospective investors. All of the following statements about variable annuities are true EXCEPT: A) a minimum rate of return is guaranteed. Question #32 of 48Question ID: 606815 The payout of an annuitized variable annuity account changes from month to month in a manner determined by which of the following? D)Variable annuity contract with a discussion regarding legislative risk, A VA with its investments in the separate account subject to market risk would not align with the customer's objective. If the annuitant should die during that time, any death benefit would be paid to a beneficiary designated by the annuitant at the time the annuity was purchased. C)A 10% penalty plus the payment of ordinary income tax on all of the funds withdrawn. vote on proposed changes in investment policy. Flexible premium annuities A flexible premium annuity is an annuity that is intended to be funded by a series of payments. contract. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. He originally invested $50,000 four years ago. Premiums made into the annuity purchase accumulation units, c. The separate account provides for a guaranteed minimum return, d. Each month the payment will increase, decrease, or remain the same as the previous months payment based on the actual return as compared to the assumed interest rate (AIR). In a variable life annuity with 10-year period certain, a contract holder receives: All of the following statements about variable annuities are true EXCEPT: Your answer, a minimum rate of return is guaranteed., was correct!.
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