A demonstrated ability to quickly learn and continuously develop functional knowledge and an understanding of company products as well as administrative, claims, underwriting and marketing functions. *This annuity is nonqualified, which means the client has paid for it with after-tax dollars and has a basis equal to the original $29,000 investment. C) Universal variable life policy. C) III and IV. Solved 6. Which of the following is not a characteristic of | Chegg.com Expert Answer. However, at the end of the period certain the payments to the named beneficiary (the spouse) will stop. If the contract holder dies before the period expires, the remaining payments are made to the beneficiary. Are Variable Annuities Subject to Required Minimum Distributions? A variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of sub accounts. **Because common stocks are not fixed dollar investments, they have the opportunity to keep pace with inflation. *A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant. A rider or statement of condition that allows a variable life insured to maintain policy coverage after becoming disabled is a benefit known as All of the following are true about annuities EXCEPT: they have all the same characteristics as life insurance. This recommendation is: D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. He makes several statements regarding the contract. An Immediate Annuity is designed to provide each of the following features, EXCEPT: The creation of an estate. A variable annuity's separate account is: C)not suitable because a lifetime income rider is only for someone who is already retired *The most important consideration in purchasing a variable annuity is to be aware that benefit payments will fluctuate with the investment performance of the separate account. C) value of underlying securities held in the separate account. A) a minimum rate of return is guaranteed. Reference: 12.1.1 in the License Exam. Hire Velocity hiring Customer Escalation Agent in Tampa, Florida The number of variable annuity accumulation units can rise during the accumulation period when additional units are being purchased. B) I and II. What Are the Biggest Disadvantages of Annuities? However, they are protected by state guaranty associations in the event that the insurance company providing the product goes out of business. Variable annuities provide protection from inflation because their monthly income can increase depending on the separate account's performance. The funds are not liquid due to the surrender fees, and there is also a 10% penalty on withdrawals before age 59-. When the first party dies, the annuity payment is made to the survivor. This chapter was updated on 15 December, 2005. For an insurance company, mortality risk turns out unfavorably if: A customer has contributed $1,000 a year for 10 years to his tax-deferred nonqualified variable annuity. The value of the separate account is now $30,000. A variable annuity is a tax-deferred retirement vehicle that allows you to choose from a selection of investments and then pays you a level of income in retirement that is determined by the performance of the investments you choose. A) variable annuities offer the investor protection against capital loss. Get the free Learn About Annuities and Their Myths - F&G Simple and general annuities problems with solutions Though its stated return might not be as high as the other choices potential returns, only a fixed annuity fits the objective and risk averse traits of this client. No Hibernation for Issuers of Index-Linked Variable Annuities and Index The payout compared to last month's payout. Policyholders . Reference: 12.3.1 in the License Exam, Question #30 of 48Question ID: 606833 A)II and IV. A client has purchased a nonqualified variable annuity from a commercial insurance company. are purchased primarily for their insurance features A) 2800. Distribution of dividends occurs during the accumulation period. B)a majority vote from the shareholders is required to change the investment objectives. If a 42-year-old customer has been depositing money in a variable annuity for 5 years, and he plans to stop investing but has no intention of withdrawing any funds for at least 20 years, he is holding: D) 100% tax deferred. c. The separate account provides for a guaranteed minimum return. Table1. D)an accounting measure used to determine payments to the owner of the variable annuity. A 45-year-old employed individual with no other retirement accounts in place The work environment characteristics are normal office conditions. Round to the nearest hundredth of a percentile. C) none of these. On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). On withdrawals from a nonqualified annuity, taxes are paid only on the amount that exceeds cost basis (the amount paid into the annuity). A) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. B) I and III. B)I and IV. I. B) the rate of return is determined by the underlying portfolio's value. national origin, genetics, disability, age, veteran status, or any other characteristic protected by law. Uses in Investing, Pros, and Cons, Indexed Annuity: Definition, How It Works, Yields, and Caps. *The accumulation period of a variable annuity may continue for many years. In a joint-and-last-survivor option, the annuity payment is made jointly to both parties while both are alive. A variable annuity is a contract between you and an insurance company, under which the insurer agrees to make periodic pay- ments to you, beginning either immediately or at some future date. D)suitable if she has enough equity in the home to fund the variable annuity without cashing out the other VA contract, Based on the information given in the question, the VA recommendation would not be suitable. How is the distribution taxed? Based on the clients profile which of the following would be the best recommendation? Complete a blank sample electronically to save yourself time and money. By clicking Accept All Cookies, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. D) each annuity unit's value varies with time, but the number of annuity units is fixed. *When a variable contract is annuitized (distributed in regular payments, not as a lump sum), the number of accumulation units is multiplied by the unit value to arrive at the account's current value. No paper. Chapter 7: Annuities Flashcards | Quizlet A) There is no risk in a variable annuity. Chapter 12: Variable Annuities Flashcards | Quizlet All of the following characteristics are shared by both a mutual fund and a variable annuity's separate account EXCEPT: *Only variable annuities have payout plans that provide the client income for life. C)I and IV. C) with guaranteed minimum withdrawal benefits (GMWBs) a lifetime of periodic payments is guaranteed Over the following year, the stock fund has a 10% return, and the bond fund has a 5% return. The growth portion is subject to a 10% penalty. A)II and III. The $30,000 contract value represents $10,000 of contributions and $20,000 of earnings. Because they have a separate account in which the investor assumes the investment risk, they can only be sold by individuals with both insurance and securities licenses. Which of the following recommendations would best meet the customer profile? Your 65-year-old client owns a nonqualified variable annuity. Do homework Doing homework can help you learn and understand the material covered in class. An accumulation unit in a variable annuity contract is: Once the cost basis is reached, any further withdrawals are a nontaxable return of principal. Practice all cards. An 18-year-old, unmarried high school student sought a safe investment for a $30,000 bequest until after she graduated from college. D) I and IV Needs - are goal-directed forces that people experience. If the customer takes a withdrawal of $10,000, what are the tax consequences? If your customer invests in a variable annuity and chooses to annuitize at age 65, which of the following statements are TRUE? $63,000 b.$51,000 c. $18,000 d.$6,000. This recommendation is: B)changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices. C) II and IV. must provide full and fair disclosure. A)Fixed annuities. B) During the accumulation period. can be sold by someone with only an insurance license B) contact the issuer of the clients existing VA contract to facilitate the clients surrender of the contract. A)unsuitable because the return on something as conservative as a variable annuity tends to be low. Which of the following is NOT associated with characteristics of shares who needs access to the sum invested at later time. What is her total tax liability? Reference: 12.1.4.1 in the License Exam. Flashcards - Securities and Tax - FreezingBlue B)Capital gains taxation on the earnings withdrawn in excess of the owner's basis. no. Round to the nearest hundredth of a percent. D) not suitable because a lifetime income rider is only for someone who is already retired. externalities. Based on this information the RR should: B)I and II C)the SEC. The separate account is used for both variable life insurance and variable annuity investments. 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. The LATF-adopted ILVA Actuarial Guideline has an effective date of July 1, 2024 for contracts, riders or endorsements issued on or after that date. If one purchases an annuity for a set price, the issuing company would invest the funds and hold them until they are supposed to be disbursed, generally based on the owner's age. How to Navigate Market Volatility While Saving for Retirement, Variable Annuity: Definition and How It Works, Vs. The value of accumulation and annuity units varies with the investment performance of the separate account. Given that all of the current retirement investments are subject to market risk, the customer wants these new funds to have no market risk exposure. The owner of a variable annuity has all of the following rights EXCEPT the right to vote: a. for the board of trustees b. to change the separate account's investment objective c. for distributing income and capital gains d. for dissolution of the trust c. for distributing income and capital gains. What are the characteristics of fixed annuities? - InsuranceQnA II. *When money is deposited into the annuity, it is purchasing accumulation units. Universal variable life policies The return on a variable annuity is not guaranteed; it is determined by the underlying portfolio's value. a) What percentage of Facebook's users are from the United States? Variable annuities involve underlying equity investments in a separate account. A joint life with last survivor annuity: Of the answer choices given the best would be to reevaluate the recommendation based on the new information tendered by the client. Which of the following statements regarding variable annuities are TRUE? The earnings are taxable but the cost basis is returned tax free. D)the rate of return is determined by the underlying portfolio's value. Though there is no beneficiary designation during the annuitization, this is not an issue for this annuitant. Every annuity has some characteristics in common.