Pennsylvania Life Insurance Exam –
Annuities Review Questions and Correct
Answers
An owner's cost basis for a deferred annuity is typically the same as the ✅premiums
paid into the annuity
An annuity which starts paying benefits within a month after issuance is called a(n)
✅immediate annuity
When does interest income in a deferred annuity get reported for federal income taxes?
✅When the distributions are received
Which of these annuity features is meant to discourage withdrawals and exchanges?
✅Surrender charges
The interest earned on the cash value of an individually-owned annuity is considered to
be ✅tax-deferred
How are monthly life annuity benefit payments treated under a tax sheltered annuity
(TSA)? ✅Taxed as ordinary income in the year received
The interest rate on a fixed annuity does not fall below the ✅guaranteed contract rate
What does a fixed life annuity offer protection against? ✅Savings depletion because of
longevity
To whom are annuity payments made to during the ✅Annuitant
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Flexible premiums according to a stock index
Investment risk is assumed by the policyowner
Investment risk is assumed by the insurer
Payout option can be changed after the accumulation phase ✅Investment risk is
assumed by the policyowner
The annuitant in a single premium deferred annuity (SPDA)
receives immediate benefit payments
makes only one premium payment
receives deferred benefit payments
is also the beneficiary ✅receives immediate benefit payments
, How do benefit payments fluctuate over time in a variable life annuity?
Benefit payments stay fixed
Depends on market value changes in the separate investment account
Annuitant controls any benefit payment changes
Any benefit payment fluctuations have to be approved in writing by the owner
✅Depends on market value changes in the separate investment account
What happens to the cash value of a market value adjusted annuity if it's surrendered
early?
Market value adjustment is applied
Subject to no adjustments
Subject to a surrender charge only
Cash value is forfeited ✅Market value adjustment is applied
When a large sum of money is used to structure monthly payments, which product is
typically used?
A 401(k) plan
A 403(b) plan
A deferred annuity
An immediate annuity ✅An immediate annuity
The owner of a single premium deferred annuity is entitled to do all of these EXCEPT
make multiple premium payments
choose the length of the payout period
choose who will be the recipient of the annuity payments
cash surrender the contract ✅make multiple premium payments
When does the owner's contractual rights begin under an individual annuity contract?
Purchase date
When the benefit period begins
When the accumulation period ends
After free-look period expires ✅Purchase date
Which benefit can be found in an equity indexed annuity, but not found in a fixed
annuity?
Protection against living too long
Equity loans
A fixed rate of return
Protection against inflation ✅Protection against inflation
Taking a sum of money and decreasing it in size would fit the description of
capital gains
capital appreciation
capital liquidation
capital sum ✅capital liquidation
Annuities Review Questions and Correct
Answers
An owner's cost basis for a deferred annuity is typically the same as the ✅premiums
paid into the annuity
An annuity which starts paying benefits within a month after issuance is called a(n)
✅immediate annuity
When does interest income in a deferred annuity get reported for federal income taxes?
✅When the distributions are received
Which of these annuity features is meant to discourage withdrawals and exchanges?
✅Surrender charges
The interest earned on the cash value of an individually-owned annuity is considered to
be ✅tax-deferred
How are monthly life annuity benefit payments treated under a tax sheltered annuity
(TSA)? ✅Taxed as ordinary income in the year received
The interest rate on a fixed annuity does not fall below the ✅guaranteed contract rate
What does a fixed life annuity offer protection against? ✅Savings depletion because of
longevity
To whom are annuity payments made to during the ✅Annuitant
When compared to a fixed annuity, a variable annuity has what distinguishing feature?
Flexible premiums according to a stock index
Investment risk is assumed by the policyowner
Investment risk is assumed by the insurer
Payout option can be changed after the accumulation phase ✅Investment risk is
assumed by the policyowner
The annuitant in a single premium deferred annuity (SPDA)
receives immediate benefit payments
makes only one premium payment
receives deferred benefit payments
is also the beneficiary ✅receives immediate benefit payments
, How do benefit payments fluctuate over time in a variable life annuity?
Benefit payments stay fixed
Depends on market value changes in the separate investment account
Annuitant controls any benefit payment changes
Any benefit payment fluctuations have to be approved in writing by the owner
✅Depends on market value changes in the separate investment account
What happens to the cash value of a market value adjusted annuity if it's surrendered
early?
Market value adjustment is applied
Subject to no adjustments
Subject to a surrender charge only
Cash value is forfeited ✅Market value adjustment is applied
When a large sum of money is used to structure monthly payments, which product is
typically used?
A 401(k) plan
A 403(b) plan
A deferred annuity
An immediate annuity ✅An immediate annuity
The owner of a single premium deferred annuity is entitled to do all of these EXCEPT
make multiple premium payments
choose the length of the payout period
choose who will be the recipient of the annuity payments
cash surrender the contract ✅make multiple premium payments
When does the owner's contractual rights begin under an individual annuity contract?
Purchase date
When the benefit period begins
When the accumulation period ends
After free-look period expires ✅Purchase date
Which benefit can be found in an equity indexed annuity, but not found in a fixed
annuity?
Protection against living too long
Equity loans
A fixed rate of return
Protection against inflation ✅Protection against inflation
Taking a sum of money and decreasing it in size would fit the description of
capital gains
capital appreciation
capital liquidation
capital sum ✅capital liquidation
