Free 5-question sample test with instant feedback. See how ready you are.
Question 1
What is the PRIMARY purpose of an annuity?
Answer: An annuity is designed to provide a steady income stream, primarily to protect against the risk of outliving one's assets (longevity risk).
Question 2
What are the two phases of an annuity contract?
Answer: The accumulation phase (pay-in period where money grows) and the annuitization phase (payout period where the insurer makes periodic payments to the annuitant).
Question 3
What is the difference between the annuity owner and the annuitant?
Answer: The owner controls the contract and pays premiums, while the annuitant is the person whose life expectancy determines the payout. These can be the same person or different people.
Question 4
What is a 'pure life' (straight life) annuity payout option?
Answer: A pure life annuity pays income only for as long as the annuitant lives, with no further payments upon death—even if the annuitant dies shortly after annuitization.
Question 5
How does a fixed annuity differ from a variable annuity?
Answer: A fixed annuity credits a guaranteed minimum interest rate with no investment risk to the owner, while a variable annuity's value fluctuates based on the performance of separate account sub-accounts chosen by the owner.