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Georgia Annuity Suitability Training FINAL EXAM Copy

Posted on 01.03.19

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Question 1 of 75

1. Question
What is true of all annuity policy contracts?
- They all agree to pay the insured a regular income over a period of years.
- They all have a single premium and offer a reliable rate of return.
- The all have flexible premium options and no surrender charges.
- They all have interest rates or benefits that are linked to an equity index.
Question 2 of 75

2. Question
What is the term “annuity” used to describe, besides the contract itself?
- The owner of the contract
- The income that the individual receives under the contract
- The individual on whose life the contract is based
- The amount that the contract owner invests in the contract
Question 3 of 75

3. Question
How have annuities maintained an advantage over other forms of investing?
- They are never tax deferred.
- They all offer reliable rates of return.
- The interest earned is tax deferred.
- They all have simple, single premium plans.
Question 4 of 75

4. Question
Historically, which of the following was part of the appeal of annuities?
- They offered a guaranteed annual income after the insured retired, but only for a certain number of years.
- They created an estate immediately upon the insured's death.
- Historically, annuities were not appealing and only rose to prominence very recently.
- They offered a guaranteed annual income after the insured retired, no matter how long they lived.
Question 5 of 75

5. Question
In a variable annuity contract, the insurer agrees to make periodic payments when?
- When they decide that it is advantageous for them to do so
- When the insured decides it is advantageous for them to do so
- Either immediately, or at some future, predecided, date
- Immediately, and they must continue to do so as long as the insurer is still living
Question 6 of 75

6. Question
Variable annuities operate under the premise that not everyone needs what?
- Money or possessions of any kind
- A set or fixed rate of return
- Uncertainty or unreliability when it comes to their investments
- Multiple payment or payout options
Question 7 of 75

7. Question
What do fixed annuities offer?
- A guaranteed interest rate for a set period of time
- A guaranteed interest rate for as long as the insured is living
- The most growth and highest payouts of all annuity types
- Advantages similar to mutual funds
Question 8 of 75

8. Question
Though equity-indexed annuities are thought of as their own annuity type, they are closely related to which other annuity type?
- Variable annuities
- Fixed annuities
- Single premium annuities
- Immediate benefit annuities
Question 9 of 75

9. Question
Single premiums are more likely to be associated with which annuity type?
- Variable annuities
- Immediate benefit annuities
- Fixed annuities
- Equity index annuities
Question 10 of 75

10. Question
Flexible premiums are more likely to be associated with which type of annuity?
- Fixed annuities
- Single premium annuities
- Equity index annuities
- Variable annuities
Question 11 of 75

11. Question
Which of these answers are annuity benefit options?
- Single and Flexible
- Variable and Fixed
- Immediate and Deferred
- Free-Look and Surrender
Question 12 of 75

12. Question
Which of the follow is not a way to describe how the insured will receive annuity income payments?
- Straight life annuity
- Annuity unknown annuity
- Variable life annuity
- Annuity certain annuity
Question 13 of 75

13. Question
Which of the following is not directly a part of the annuity transaction?
- The insurance rating company
- The annuity owner
- The annuitant
- The insurer
Question 14 of 75

14. Question
Which of the following describes the person or trustee with investment control over the annuity contract?
- The annuitant
- The annuity owner
- The agent
- The insurer
Question 15 of 75

15. Question
In owner-driven annuity contracts, benefits are based on which of the following happening?
- The death, and only the death, of the annuitant
- The annuitant's death, disability, or the annuitant reaching a certain age
- The annuity owner's death, disability, or the owner reaching a certain age
- The owner's investment reaching a certain benchmark
Question 16 of 75

16. Question
In annuitant-driven annuity contracts, benefits are based on which of the following?
- The death, and only the death, of the annuity owner
- The annuity owner's death, disability, or the owner reaching a certain age
- The annuitant's investment reaching a certain point
- The annuitant's death, disability, or the annuitant reaching a certain age
Question 17 of 75

17. Question
Which of the following is not a part of structuring an annuity correctly?
- Maximizing payout options
- Minimizing taxes
- Minimizing payout options
- Minimizing penalties
Question 18 of 75

18. Question
What is the best way for an agent to ensure that they will not be caught in a badly titled annuity contract?
- Check with the insurer that all parties are in their intended roles
- Obtaining a letter of instruction from the client's attorney on how to structure the contract
- Obtain a letter of instruction from an outside rating company on how to structure the contract
- Check with the annuity owner that all parties are in their intended roles
Question 19 of 75

19. Question
Which of the following describes the role of the annuitant?
- The individual on whose life the annuity is based
- The individual with investment control over the annuity
- The individual that facilitates between the owner and the insurer
- The company that rates the reliability of insurance companies
Question 20 of 75

20. Question
Which of the following describes the person, persons, or trust that receives the annuity in the event of the death of the annuitant?
- The annuity owner
- The beneficiary
- The insurer
- The agent
Question 21 of 75

21. Question
Which clients are not allowed to cancel annuities under a Free-Look Provision?
- Clients under 60 that do so within 30 days
- Clients over 60 that do so within 30 days
- Clients that wait longer that 30 days
- All clients that do so within 30 days
Question 22 of 75

22. Question
Which plans do not contain Free-Look Provisions?
- Variable annuity contracts
- Owner-driven annuity contracts
- Single premium annuity contracts
- Annuity contracts sold through group plans
Question 23 of 75

23. Question
In the opinion of this lesson, which party involved with the annuity transaction is most responsible for discovering the solvency of insurers?
- The insurer
- The annuity owner
- The agent
- The beneficiary
Question 24 of 75

24. Question
In the opinion of this lesson, how many insurance rating services should an agent consult before vouching for an insurance companies solvency?
- The insurerOne is usually enough, any more is overkill
- At least three, if they are all consistent, it bodes well for the company
- Two ratings is enough to allow an agent to compare numbers, which means it is enough
- An agent must consult all of the rating services before telling a client
Question 25 of 75

25. Question
What is the agent’s role during an annuity transaction?
- Selecting a company and a product and facilitating between the owner, annuitant, and insurance company
- Taking investment control over the annuity contract
- Rating insurance companies and supplying those ratings to your clients so they can make informed decisions
- Deciding when an where the annuity will be invested to maximize interest rates
Question 26 of 75

26. Question
What is the maximum age for annuitants required by all insurance companies?
- 65 years old
- There is no universal maximum age
- 85 years old
- The maximum age must be between 65 and 85 years of age
Question 27 of 75

27. Question
Is all the money a contract owner pays always into an annuity invested?
- No, the contract owner is not the party that pays into an annuity.
- Yes, charges are always taken out of the interest rate of the annuity.
- No, some money is used for sales commissions and fees.
- Yes, there are no charges and fees associated with annuities.
Question 28 of 75

28. Question
The length of time the client is willing to commit their money has a direct effect on which aspect of an annuity?
- The type of annuity the client selects
- The provisions the client is allowed to select
- The administrative fees and charges the client has to pay
- The interest the client receives or is credited
Question 29 of 75

29. Question
Which of the follow is an example of a waiver found in an annuity contract?
- Death Waiver
- Terminal Illness Waiver
- All listed answers are correct
- Nursing home waiver
Question 30 of 75

30. Question
What do waivers in annuity contracts usually trigger in crisis situations?
- Higher interest rates
- Lower surrender rates
- Lower interest rates
- More administrative charges
Question 31 of 75

31. Question
Settlement options refer to what aspect of an annuity contract?
- How the fund will be distributed
- How the investments will be made
- How the premiums will be organized
- How the surrender charges will be calculated
Question 32 of 75

32. Question
Which of the following is not a settlement option?
- Single Lump Sum
- Variable
- Designated Dollar
- Interest-Only
Question 33 of 75

33. Question
What does the life income option offer?
- A single lump sum payout
- A specified dollar amount over a number of years
- Payments until the annuitant dies
- Interest only payments until another payment option takes effect
Question 34 of 75

34. Question
Which of the following is not a form of the life income option that was discussed in this course?
- Straight life option
- Period Certain Option
- Refund Life Option
- Indexed option
Question 35 of 75

35. Question
What percentage of each payment received through a settlement plan is taxable?
- 75%
- 0%
- 100%
- 50-100%
Question 36 of 75

36. Question
Which of the following is an example of a relatively standard, no penalty withdrawal option?
- None, annuity contracts do not typically have withdrawal options
- Up to 10 percent per year after an initial year-long waiting period.
- None, All withdrawal options have a penalty of some kind
- 2 to 5% yearly immediately following the annuity transaction
Question 37 of 75

37. Question
Surrender charges are typically used for which kinds of withdrawals?
- Withdrawals that exceed the free withdrawal privilege
- All withdrawals starting immediately after the annuity transaction
- All withdrawals after an initial year-long waiting period
- None of the withdrawals typically require a surrender charge
Question 38 of 75

38. Question
Who developed the market value adjustment (MVA) to adjust yields when interest rates were changing rapidly?
- An upset annuity owner seeking to get higher interest rates
- Insurers
- Insurance rating companies
- The Internal Revenue Service
Question 39 of 75

39. Question
What do fixed rate annuity contracts offer that other annuity contracts do not?
- The highest rate of return
- A rate of return determined by an equity index
- The most reliable rate of return
- The lowest rate of return
Question 40 of 75

40. Question
Do most fixed rate annuities have any associated fees?
- No, fixed rate annuities have no associated fees.
- Yes, fixed rate annuities have some annual administrative fees.
- The fees associated with a fixed rate annuity vary widely and are hard to categorize.
- Other than surrender charges, most fixed rate annuities have no associated charges or fees.
Question 41 of 75

41. Question
What kind of returns do fixed rate annuity contracts offer?
- A guaranteed return for the length of the annuitants life
- A minimum and maximum return, but nothing specific
- A set return for a specified period of time
- A set return for an unspecified period of time
Question 42 of 75

42. Question
Which of the following is not an example of a fixed rate annuity contract?
- Portfolio rate annuities
- All the answers listed are examples of fixed rate annuity contract
- New money annuity contract
- Two tier annuity contract
Question 43 of 75

43. Question
While fixed rate annuity contracts are often compared to CDs, variable rate annuity contracts are often compared to what?
- Mutual funds
- CDs
- Equity index annuity contracts
- None of the answers listed here
Question 44 of 75

44. Question
Do variable annuity contracts typically have charges and fees?
- No, variable rate annuities have no associated fees.
- Yes, each variable annuity contract has its own schedule of fees that should be considered.
- Other than surrender fees, most variable rate annuities have no associated fees.
- Yes, all variable annuity contracts have an annual $50 administrative fee.
Question 45 of 75

45. Question
The initial objective of variable annuities was to combine which to things?
- The interest rates of CDs with the reliability of mutual funds
- The reliability of CDs with the guaranteed features of annuities
- The guaranteed features of annuities with the growth possibilities of equities
- The grown possibilities of equities with the interest rates of CDs
Question 46 of 75

46. Question
What are the risks associated with variable annuities?
- The solvency of the insurance company
- The fluctuating nature of the investments
- Variable annuity contracts are risk-free investments
- Both the solvency of the insurance company and the investment's fluctuating nature
Question 47 of 75

47. Question
Which type of investor would be most comfortable with a company-managed variable annuity contract?
- An investor with a moderate amount of investment experience that wants some control over their investments
- An investor with a great deal of investment experience that wants to select various investment subaccounts with different goals
- An investor with little to no experience who wants the insurance company investment managers to manage the annuity
- It is unlikely that any individual would be comfortable with a company-managed variable annuity contract
Question 48 of 75

48. Question
Which type of investor would be most comfortable with a self-directed variable annuity contract?
- An investor with a moderate amount of investment experience that wants some control over their investments
- An investor with a great deal of investment experience that wants to select various investment subaccounts with different goals
- An investor with little to no experience who wants the insurance company investment managers to manage the annuity
- It is unlikely that any individual would be comfortable with a company-managed variable annuity contract
Question 49 of 75

49. Question
Self-direct variable annuity contracts are great for investment-savvy clients for what reason?
- They allow the contract owner to alter the investment of funds as their investment objectives change.
- They allow the contract owner to set their own interest rate.
- They allow the contract owner to withdrawal amounts over the withdrawal privilege amount without penalty.
- Self-directed variable annuity contracts are not great for investment-savvy clients.
Question 50 of 75

50. Question
Equity Index Annuity contracts are named for what specific reason?
- They are categorized by insurance rating companies.
- Current or excess interest is paid in the form of participation in the equity index.
- They have a variety of subaccounts that allow the contract owner to diversify their investments.
- They offer a reliable rate of return.
Question 51 of 75

51. Question
Charges and fees associated with equity indexed annuity contracts are similar to fixed annuity contract charges in what way?
- Like fixed rate annuities, equity indexed annuities have annual administrative charges and fees.
- There are very few comparable aspects between fixed rate annuity contracts and equity indexed annuity contracts.
- Other than surrender fees, most equity indexed annuities have no associated fees.
- In addition to surrender fees, most equity indexed annuities have annual administrative fees.
Question 52 of 75

52. Question
For the purpose of equity indexed annuity contracts, using an index’s average value instead of its value on specific dates is known as what?
- Point-to-point
- High-water mark
- Annual reset
- Monthly averaging
Question 53 of 75

53. Question
For the purpose of equity indexed annuity contracts, using two distinct points to calculate interest is know as what?
- High-water mark
- Annual reset
- Point-to-point
- Monthly averaging
Question 54 of 75

54. Question
Which of the following is not a design used to calculate interest rates in equity indexed annuity contracts?
- High-water mark
- Straight life
- Point-to-point
- Annual reset
Question 55 of 75

55. Question
Which of the following best describes some of the appealing aspects of annuity contracts?
- They offer income tax advantages and are useful in retirement planning.
- They offer sales tax advantages.
- They are wildly risky, but can potentially be very profitable.
- They are easy to trick or scare people into buying.
Question 56 of 75

56. Question
Which of the following is not a reason to use annuity contracts in retirement planning?
- They are relatively safe.
- They compensate their payouts for inflation.
- They provide tax benefits when accumulating
- They can provide guaranteed income for a specified period of time.
Question 57 of 75

57. Question
What is the trade-off when selecting a qualified annuity contract?
- Reduced government regulations, but also reduced tax benefits
- Increased tax benefits, but also less reliable return rates
- Increased tax benefits, but also increased government regulations
- Increased tax benefits, but also reduced premiums
Question 58 of 75

58. Question
What is the trade-off when selecting a non-qualified annuity contract?
- Increased tax benefits, but also increased government regulations
- Increased tax benefits, but also reliable return rates
- Reduced government regulations, but also reliable rates of return
- Reduced government regulations, but also reduced tax benefits
Question 59 of 75

59. Question
Generally, non-qualified annuities do not limit which of the following?
- Withdrawals from the annuity
- Interest rates of the annuity
- Contributions to the annuity
- The annuities rate of return
Question 60 of 75

60. Question
What is the tax status of investments in annuities?
- They are tax free.
- They are tax deferred.
- They are taxed.
- They are subject to sales taxes.
Question 61 of 75

61. Question
Withdrawals from annuities are subject to which of the following?
- Sometimes income taxes and penalties
- Always income taxes and penalties
- Always penalties
- Sometimes income taxes
Question 62 of 75

62. Question
Which of the following best describes the way the IRS views premature withdrawals from qualified plans when compared to similar withdrawals from non-qualified plans?
- Qualified premature withdrawals are typically taxed at normal income rates while non-qualified withdrawals are not.
- Both qualified and non-qualified premature withdrawals are taxed at ordinary income rates.
- Non-qualified premature withdrawals are typically taxed at normal income rates while non-qualified withdrawals are not.
- Both qualified and non-qualified premature withdrawals are not taxed.
Question 63 of 75

63. Question
Which of the following is true of non-qualified annuity contracts?
- Loans made from them have dire tax consequences.
- They always have higher interest rates.
- Loans made from them have little tax consequence.
- They are strictly regulated by the government.
Question 64 of 75

64. Question
What is generally true of exchanging policies?
- It is generally thought to be a good idea.
- It is a good idea if the owner has a non-qualified annuity contract.
- It is generally not a good idea due to a long list of factors.
- It is a good knee-jerk reaction if a variable annuity has been doing badly in recent years.
Question 65 of 75

65. Question
As far as taxes are concerned, liquidating or selling an annuity contract is which of the following?
- Not a taxable event
- A potentially taxable event as long as the owner gains more than just his or her contributions from the liquidation or sale
- A taxable event
- A potentially nontaxable event as long as certain requirements from IRC Section 1035 are met
Question 66 of 75

66. Question
In non-qualified contracts, when the owner dies during the accumulation phase, how much time is allowed for the distribution of the owners death benefit?
- Five years, with one exception
- Five years with no exceptions
- Ten years with one exception
- There is no time limit
Question 67 of 75

67. Question
How does the distribution of a qualified annuity contract differ from other qualified plan distributions?
- It must take place within five years of the owner's death, with one exception.
- There are no significant differences.
- It must take place within five years of the owner's death, with one exception.
- The spouse must the beneficiary in a qualified plan.
Question 68 of 75

68. Question
Why do annuity investments grow to a larger sum than similarly sized investments in CDs?
- They are underwritten by the government and, therefore, cannot fail.
- Annuity investments are tax free while CDs are not.
- Annuity investments are tax free whereas CDs are generally just tax deferred.
- Annuity investments are tax-deferred while CDs are taxed at the investor's marginal tax rate
Question 69 of 75

69. Question
How can clients with qualified contracts receive a tax break?
- By taking their distribution in a single lump sum
- By giving their distribution back to the insurer
- By taking their distributions in periodic payments determined, in part, by the IRS
- By taking their distributions in period payments determined entirely by the rate of return
Question 70 of 75

70. Question
What aspects of an annuity contract does the beneficiary directly control?
- The rate of return
- No aspect of the contract
- Choosing when to withdrawal
- Choosing annuitants
Question 71 of 75

71. Question
Which of the following is a goal of careful annuity contract structuring and titling?
- To maximize payout options and minimize taxes and penalties
- Ensuring that the annuitant dies and leaves the value of the annuity to the insurer
- Maximizing premiums and minimizing rates of return
- Maximizing surrender charges and decreasing the client's liquidity
Question 72 of 75

72. Question
The guarantees offered by annuities are generally sought out by what type of investor?
- Wealthy investors
- All types of investors
- Late-start investors
- Lower-income investors
Question 73 of 75

73. Question
What is the role of annuities within retirement plans?
- A well established role that only produces positive results
- A well established role that rarely produces positive results
- They are popular, but their role is debated
- They are rarely used, and for good reason
Question 74 of 75

74. Question
Qualified plans within retirement plans function in what way?
- The annuity is distributed out and increases a person's taxable salary
- Qualified plans are not commonly used in retirement plans
- A person's taxable salary is reduced, after it is taxed, and invested in a multitude of investments
- A person's taxable salary is reduced, before it is taxed, and invested in a multitude of investments
Question 75 of 75

75. Question
When are the earnings from non-qualified annuities taxed?
- When premiums are paid into the annuity
- As interest is earned on the annuity
- When earnings are withdrawn
- When the annuitant dies

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