AD Banker Retention Questions Ch 5

A contract that is designed to accumulate value over time with the intent to distribute the funds over the lifetime of an individual is called _____.

• Whole life insurance

• Variable life insurance

• An endowment

• An annuity

While life insurance may accumulate money that a person could use in retirement, none promise the same long term benefit of a non-qualified annuity, which is _____.

• A stream of income that the annuitant cannot outlive

• Tax-free payments for the lifetime of a beneficiary

• Tax-free money for college education or other qualified expenses

• Tax-deferred growth of principal

When the owner and the annuitant is the same person, a spouse beneficiary is permitted what choice under the Internal Revenue Code if the annuitant dies prior to annuitizing the contract?

• A one-time opportunity to convert the proceeds to a Roth IRA without taxation

• To adopt the annuity as his/her own and become the annuitant or to name another annuitant

• The option to withdraw all funds tax-free in the form of a 1035 exchange to life insurance

• There are no choices, when the annuitant dies, the principal value must be distributed to the beneficiary, who may choose the distribution option if none was selected in advance

All of the following are correct regarding an annuity, EXCEPT:

• An annuity can be immediate or deferred

• An annuity can be paid with a single premium or periodic premium

• An immediate annuity must start providing income within 3 years of the first premium payment

• The accumulation in an annuity grows tax-deferred

A flexible premium deferred annuity permits all of the following EXCEPT:

• Payments to the annuitant beginning within one month of the issuance of the contract

• Scheduled and unscheduled additions of principle at any time prior to annuitization

• limited partial surrenders each year not subject to a surrender charge

• Annuitization at any time

Which of these annuity distribution options promises the largest possible payment to a single annuitant?

• Life income only

• Life income with period certain

• Installment refund

• Lump sum refund

A "Joint and 1/2 Survivor" distribution option means which of the following statements is CORRECT?

• The annuitant receives a full share of the annuity payment each month, and the beneficiary receives a one-half share of the payment

• The annuitant receives a full share of the annuity payment, and the spouse receives an additional one-half

• There are two annuitants named in the policy, and each contributes one-half of the monthly premium or the lump sum that establishes the annuity

• When one of the joint annuitants dies, the survivor's continuing payments will be one-half of the total payment both were receiving

What is "fixed" in a fixed annuity?

• The annuitant

• The interest crediting rate

• The beneficiary

• The investment option in the separate account

What must a producer have in order to market variable annuities?

• A securities license as a variable contracts and investment company representative in addition to a life agent license

• A copy of the current prospectus to give to a customer prior to or at the time of the first appointment

• A good business reputation and no convictions listed in 18 U.S.C. 1033, the Federal Violent Crime Control and Law Enforcement Act

• A variable contracts insurance agent license issued by his/her resident state's regulator

What is different about a corporate owned nonqualified annuity compared to an individually owned nonqualified annuity?

• It earns a rate of interest limited by the IRC

• Interest or gains are taxable as income in the year earned

• It does not provide a death benefit guarantee of principal to the beneficiary

• Interest or gains are taxable as capital gains, not ordinary income