Income Beginner: Introduction to Annuities

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1.
At any time after commencement of lifetime annuity payments, the annuitant may request a surrender to receive a lump sum cash payment.
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False. To receive lifetime annuity payments, the annuitant must surrender the annuity cash value to the insurance company.
2.
If an annuitant will receive payments for life, but at least for 10 years, which payout option has he or she selected?
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A life annuity with period certain. The annuitant receives payments for life, with a certain period of time guaranteed. If the annuitant dies before expiration of the period certain, payments continue to the named beneficiary for the remainder of the period.
3.
Once the money is annuitized from an annuity that had received nondeductible premiums, _______.
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A portion of each payment is taxed according to an IRS formula.
4.
Most annuities have a surrender charge schedule built into them that penalizes early withdrawals.
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True. Most annuities have a surrender charge schedule built into them that penalizesand therefore discouragesearly withdrawals (except permitted limited withdrawals). A typical surrender charge might start at 10 percent and decline to 0 percent over a 10- or 15-year period.
5.
Most insurance companies allow loans from an annuity.
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False. Because loans are classified as taxable withdrawals, most insurance companies do not permit loans from annuities.
6.
Fixed annuity premiums must be placed into the insurance companys _______.
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General account. Fixed annuity premiums are placed into the insurance companys general account. This money is then reinvested very conservatively.
7.
The insurance protection offered by many annuities provides a lump sum to the named beneficiary according to which formula?
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The greater of total payments or the current account value. In the event of the annuitants death prior to annuitization, the named beneficiary will receive the greater of the total payments made or the current value of the account at the time of death.