Wisconsin Life Insurance Exam|Latest Update
Graded A+
Cross Purchase Plans
Agreements that provide that upon a business owner's death, surviving owners will purchase the
deceased's interest, often with funds from life insurance policies owned by each principal on the lives
of all other principals.
Entity Plans
Agreements in which a business assumes the obligation of purchasing a deceased owner's interest in
the business, thereby proportionately increasing the interests of surviving owners
Human Life Value Approach
An individuals economic worth, measured by the sum of the individuals future earnings that is
devoted to the individuals family.
403(b) Plan
A tax-deferred retirement plan for certain employees of public schools, employees of specific tax-
exempt organizations, and certain ministers. For example: teachers, hospital workers, ministers, and
some other public employees
1035 Contract Exchange
Applies to annuities. If an annuity is exchanged for another annuity, a gain (for tax purposes) is not
realized. This is also true for a life insurance policy or an endowment contract exchanged for an
annuity. However, an annuity cannot be exchanged for a life insurance policy. This provision in the tax
code allows you, as a policyholder, to transfer funds from a life insurance, endowment or annuity to a
new policy, without having to pay taxes
Accumulation Period
The time over which the annuitant makes payments or investments in an annuity, and when those
payments earn interest tax deferred.
Accumulation Units
A variable annuity contract owner's interest in the separate account prior to annuitization.
Annuitant
The person that buys an annuity; may or may not be an annuity's policyowner. The annuitant's life
expectancy determines the annuity payments.
Annuity Units
At the time the variable annuity benefits are to be paid out to the annuitant, the accumulation units
in the participant's individual account are converted into annuity units.
Cash Refund Option
Provides that, upon the death of an annuitant before payments totaling the purchase price have been
made, the excess of the amount paid by the purchaser over the total annuity payments received will
be paid in one sum to designated beneficiaries.
,Deferred Annuity
An annuity in which the rents begin after a specified number of periods. May be purchased on either a
single premium or flexible premium basis. Typically do not begin making payments for at least 1 year
after the date of purchase.
Equity Indexed Annuity
A fixed, deferred annuity that allows the owner to participate in the growth of the stock market and
provides downside protection against the loss of principal and prior interest earnings if the annuity is
held to term.
Exclusion Ratio
Fraction used to determine amount of annual annuity income exempt from federal income tax.
Exclusion ratio is the total contribution or investment in the annuity divided by the expected ratio.
Fixed Annuity
An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to
the purchase payment or payments.
Immediate Annuity
Provides for payment of annuity benefit at one payment interval from date of purchase. Can only be
purchased with a single payment.
Joint and Survivor Option
A settlement option which guarantees that benefits will be payed on a life-long basis to two or more
people. This option may include a period certain and the amount payable is based on the ages of the
beneficiaries. When the surviving annuitant dies, no further payments are made to anyone. A full
survivor option pays the same benefit amount to the survivor. A two-thirds option pays two-thirds of
the original joint benefit. A one-half survivor option pays one-half of the original joint benefit.
Life with Period Certain Annuity (Life Income with Term-Certain Option)
Designed to pay the annuitant an income for life, but guarantees a definite minimum period of
payments. The life with period certain option provides income to the annuitant for life but guarantees
a minimum period of payments. Thus, if the annuitant dies during the specified period, benefit
payments continue to the beneficiary for the remainder of that period.
Market Value Adjusment
A market value adjustment can be attached to a deferred annuity that features fixed interest rate
guarantees combined with an interest rate adjustment factor that can cause the actual crediting rates
to increase or decrease in response to market conditions. Instead of having the annuity's interest rate
linked to an index with as with the equity-indexed annuity, and MVA annuity's interest rate is
guaranteed fixed if the contract is held for the period specified in the policy. The MVA feature applies
only if the contract is surrendered before the contract period expires. Otherwise, the annuity
functions the same way a fixed annuity does.
Period Certain Annuity
Annuity that guarantees payments to an ANNUITANT for a particular period of time. For example, a
10-year period-certain annuity will guarantee annuity payments for at least 10 years. If the annuitant
, dies before the 10 years have expired, the payments will continue to the beneficiaries for the
remaining term.
Periodic Payment Annuity (Flexible Premium)
Describes an annuity owner making multiple premium payments to accumulate principal. Typically,
after the initial premium, these payments are flexible with frequency and amount.
Principal
The original sum of money paid into an annuity through premiums.
Single Premium Annuity
An annuity for which the entire premium is paid in one sum at the beginning of the contract period.
This can be deferred or immediate.
Straight Life Annuity
An annuity income option that pays a guaranteed income for the annuitant's lifetime, after which
time payments stop.
Variable Annuity
Pays a lifetime income, but the income payments vary depending on common stock prices. Shifts the
investment risk from the insurer to the contract owner. These annuities invest deferred payments in
an insurer's separate accounts instead of an insurer's general accounts. Because these annuities are
based on non-guaranteed equity investments (such as common stocks) a sales rep must be registered
with the Financial Industry Regulatory Authority (FINRA) as well as hold a state insurance license.
Which annuity payout option provides for the greatest monthly payment?
Straight life
Which annuity payout option makes no additional payments regardless of when the annuitant dies?
Life only
Annuity Certain
An annuity that provides a specified, guaranteed monthly income for a stated number of years
without consideration of any life contingency.
Fixed Immediate Annuity
The amount of this payment is dependent upon starting principal, interest, and the contract's income
period.
Annuitization Phase
Phase in which investor can start taking payments from the variable annuity. Accumulation units are
converted into a fixed number of annuity units (determines the amount the annuitant will receive
each month).
An annuity is primarily used to provide...
Retirement income
Graded A+
Cross Purchase Plans
Agreements that provide that upon a business owner's death, surviving owners will purchase the
deceased's interest, often with funds from life insurance policies owned by each principal on the lives
of all other principals.
Entity Plans
Agreements in which a business assumes the obligation of purchasing a deceased owner's interest in
the business, thereby proportionately increasing the interests of surviving owners
Human Life Value Approach
An individuals economic worth, measured by the sum of the individuals future earnings that is
devoted to the individuals family.
403(b) Plan
A tax-deferred retirement plan for certain employees of public schools, employees of specific tax-
exempt organizations, and certain ministers. For example: teachers, hospital workers, ministers, and
some other public employees
1035 Contract Exchange
Applies to annuities. If an annuity is exchanged for another annuity, a gain (for tax purposes) is not
realized. This is also true for a life insurance policy or an endowment contract exchanged for an
annuity. However, an annuity cannot be exchanged for a life insurance policy. This provision in the tax
code allows you, as a policyholder, to transfer funds from a life insurance, endowment or annuity to a
new policy, without having to pay taxes
Accumulation Period
The time over which the annuitant makes payments or investments in an annuity, and when those
payments earn interest tax deferred.
Accumulation Units
A variable annuity contract owner's interest in the separate account prior to annuitization.
Annuitant
The person that buys an annuity; may or may not be an annuity's policyowner. The annuitant's life
expectancy determines the annuity payments.
Annuity Units
At the time the variable annuity benefits are to be paid out to the annuitant, the accumulation units
in the participant's individual account are converted into annuity units.
Cash Refund Option
Provides that, upon the death of an annuitant before payments totaling the purchase price have been
made, the excess of the amount paid by the purchaser over the total annuity payments received will
be paid in one sum to designated beneficiaries.
,Deferred Annuity
An annuity in which the rents begin after a specified number of periods. May be purchased on either a
single premium or flexible premium basis. Typically do not begin making payments for at least 1 year
after the date of purchase.
Equity Indexed Annuity
A fixed, deferred annuity that allows the owner to participate in the growth of the stock market and
provides downside protection against the loss of principal and prior interest earnings if the annuity is
held to term.
Exclusion Ratio
Fraction used to determine amount of annual annuity income exempt from federal income tax.
Exclusion ratio is the total contribution or investment in the annuity divided by the expected ratio.
Fixed Annuity
An annuity that offers fixed payments and guarantees a minimum rate of interest to be credited to
the purchase payment or payments.
Immediate Annuity
Provides for payment of annuity benefit at one payment interval from date of purchase. Can only be
purchased with a single payment.
Joint and Survivor Option
A settlement option which guarantees that benefits will be payed on a life-long basis to two or more
people. This option may include a period certain and the amount payable is based on the ages of the
beneficiaries. When the surviving annuitant dies, no further payments are made to anyone. A full
survivor option pays the same benefit amount to the survivor. A two-thirds option pays two-thirds of
the original joint benefit. A one-half survivor option pays one-half of the original joint benefit.
Life with Period Certain Annuity (Life Income with Term-Certain Option)
Designed to pay the annuitant an income for life, but guarantees a definite minimum period of
payments. The life with period certain option provides income to the annuitant for life but guarantees
a minimum period of payments. Thus, if the annuitant dies during the specified period, benefit
payments continue to the beneficiary for the remainder of that period.
Market Value Adjusment
A market value adjustment can be attached to a deferred annuity that features fixed interest rate
guarantees combined with an interest rate adjustment factor that can cause the actual crediting rates
to increase or decrease in response to market conditions. Instead of having the annuity's interest rate
linked to an index with as with the equity-indexed annuity, and MVA annuity's interest rate is
guaranteed fixed if the contract is held for the period specified in the policy. The MVA feature applies
only if the contract is surrendered before the contract period expires. Otherwise, the annuity
functions the same way a fixed annuity does.
Period Certain Annuity
Annuity that guarantees payments to an ANNUITANT for a particular period of time. For example, a
10-year period-certain annuity will guarantee annuity payments for at least 10 years. If the annuitant
, dies before the 10 years have expired, the payments will continue to the beneficiaries for the
remaining term.
Periodic Payment Annuity (Flexible Premium)
Describes an annuity owner making multiple premium payments to accumulate principal. Typically,
after the initial premium, these payments are flexible with frequency and amount.
Principal
The original sum of money paid into an annuity through premiums.
Single Premium Annuity
An annuity for which the entire premium is paid in one sum at the beginning of the contract period.
This can be deferred or immediate.
Straight Life Annuity
An annuity income option that pays a guaranteed income for the annuitant's lifetime, after which
time payments stop.
Variable Annuity
Pays a lifetime income, but the income payments vary depending on common stock prices. Shifts the
investment risk from the insurer to the contract owner. These annuities invest deferred payments in
an insurer's separate accounts instead of an insurer's general accounts. Because these annuities are
based on non-guaranteed equity investments (such as common stocks) a sales rep must be registered
with the Financial Industry Regulatory Authority (FINRA) as well as hold a state insurance license.
Which annuity payout option provides for the greatest monthly payment?
Straight life
Which annuity payout option makes no additional payments regardless of when the annuitant dies?
Life only
Annuity Certain
An annuity that provides a specified, guaranteed monthly income for a stated number of years
without consideration of any life contingency.
Fixed Immediate Annuity
The amount of this payment is dependent upon starting principal, interest, and the contract's income
period.
Annuitization Phase
Phase in which investor can start taking payments from the variable annuity. Accumulation units are
converted into a fixed number of annuity units (determines the amount the annuitant will receive
each month).
An annuity is primarily used to provide...
Retirement income
