Annuity types, retirement product terms, and related concepts tested on insurance licensing exams.
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- What is a fixed annuity?
- An annuity that provides guaranteed periodic payments from the insurance company at a fixed rate.
- What determines the return in a variable annuity?
- The performance of the investment subaccounts chosen by the annuitant.
- What is an indexed annuity?
- An annuity with returns tied to a market index, with guaranteed floor returns and participation caps.
- When do payments begin with an immediate annuity?
- Within one year of purchase, typically within 30 days.
- What is the main difference between immediate and deferred annuities?
- Immediate annuities begin payments within one year; deferred annuities delay payments until a future date chosen by the owner.
- What is a surrender charge in an annuity?
- A penalty imposed if the annuitant withdraws more than the allowed annual amount before the surrender period ends.
- What is a free look period?
- A window of time, typically 10-14 days, during which an annuity contract owner can cancel and receive a full refund without penalty.
- What does annuitization mean?
- Converting the accumulated value in an annuity into a stream of regular income payments for a specified period or for life.
- What is a subaccount in a variable annuity?
- An investment fund within the variable annuity where the owner directs portions of their premium to be invested.
- What is a mortality and expense risk charge?
- An annual fee charged by the insurance company to cover the cost of the death benefit guarantee and administrative expenses.
- What does GMIB stand for?
- Guaranteed Minimum Income Benefit, a rider that guarantees a minimum income payment even if investment performance is poor.
- What is a COLA rider on an annuity?
- Cost of Living Adjustment, a rider that increases annuity payments periodically to help offset inflation.
- What is a Traditional IRA?
- An Individual Retirement Account where contributions may be tax-deductible and earnings grow tax-deferred until withdrawal in retirement.
- What is the key difference between a Traditional IRA and a Roth IRA?
- Traditional IRA contributions are pre-tax and withdrawals are taxable; Roth IRA contributions are post-tax and qualified withdrawals are tax-free.
- Who is a SEP-IRA designed for?
- Self-employed individuals and small business owners who want to make larger retirement contributions than a Traditional IRA allows.