Annuity Suitability Examination

1.Elena is 72 and must pay a $15,000 roof bill next month from her $80,000 of savings. An agent recommends a deferred annuity that restricts withdrawals for eight years because the first-year rate is high. Which conclusion is correct?

2.Omar buys a fixed annuity that credits a rate set by the insurer. Who bears the investment risk on the assets that support that rate?

3.Priya allocates her variable annuity premium to investment options. Those options lose value over the next year. Which statement is correct?

4.An indexed annuity illustration lists an index of large-company stocks. What does Noah own inside that contract?

5.In this contract the indexed credit has a 6 percent cap and no other limit. The linked index rises 10 percent during the term. What rate is credited?

6.In this contract the indexed floor is 0 percent. The linked index falls 8 percent during the term. How does that index result affect principal?

7.Luis pays one premium into a deferred annuity. He plans to leave the money there for twelve years and then choose income. Which description fits?

8.Helen pays one premium for an annuity, and the schedule starts monthly income two months after issue. Which description is accurate?

9.Greg wants to move the cash value of a life insurance policy into an annuity and asks whether the gain is taxed now. Which exchange can qualify under Section 1035?

10.Rita owns a nonqualified annuity with a gain. She asks to move it into a new life insurance policy with no current tax under Section 1035. What is correct?

11.A contract charges 7 percent on withdrawals above the free amount. Carlos withdraws $40,000, and the entire $40,000 is above the free amount. What is the surrender charge?

12.This contract allows a 10 percent free withdrawal of an $80,000 account value. Nina takes out $20,000. How much of that withdrawal is exposed to a surrender charge?

13.Sam's annuity is held inside his workplace retirement account. How should that annuity be described?

14.Dana uses cash from her taxable savings to buy an annuity. The contract is not inside an IRA or a workplace plan. Which label fits?

15.On June's nonqualified immediate annuity, the exclusion ratio treats 60 percent of each payment as a return of premium. Each payment is $1,000. How is one payment split?

16.A bank employee offers Ken an annuity in the bank lobby. Ken asks whether that annuity is a bank deposit insured by the FDIC. Which answer is correct?

17.Camille says she cannot accept a drop in her savings and needs the principal to stay stable. An agent recommends a variable annuity whose options can lose value. Which conclusion is correct?

18.Victor's annuity is still inside a surrender period. Replacing it would cost a $6,000 charge and end a contract benefit he still uses. The new illustration is only slightly higher. Which view is correct?

19.In this contract the participation rate is 50 percent, with no cap and no spread. The linked index rises 8 percent. What rate is credited?

20.In this contract a spread of 2 percent is subtracted from a positive index change, and there is no cap. The index rises 7 percent. What rate is credited?

21.Andre is 81 and expects to spend most of his $40,000 savings on living costs within two years. An agent recommends a deferred annuity with a ten-year surrender charge. Which conclusion fits?

22.A client asks who bears investment risk on a fixed annuity that credits a rate declared by the insurer. Which reply is correct?

23.In this contract the cap is 6 percent, with no participation limit and no spread. The index rises 4 percent. What rate is credited?

24.Walt moves one nonqualified annuity into another annuity and asks whether the gain is taxed now under Section 1035. Which statement is correct?

25.This contract allows a 10 percent free withdrawal. Rosa's account value is $50,000. She withdraws $15,000, and a 6 percent surrender charge applies to the excess. What is the charge?

26.An owner replaces one life insurance policy with another and asks if Section 1035 can defer tax on the gain. Which statement is correct?

27.A product takes one premium and begins income within one year. It does not accumulate for many years before the first payment. Which name fits?

28.Ben is 64 and must use $25,000 of his $30,000 savings for tuition in six months. A deferred annuity offers 5 percent and a nine-year surrender charge on the full amount. Which recommendation is unsuitable?

29.Nora's variable annuity account was $100,000. The investment options she chose fell, and the value is now $85,000. She took no withdrawal. What happened?

30.Lila is 55 and can leave $40,000 untouched until a seven-year surrender period ends. She wants the insurer to set the rate, keeps emergency cash separate, and wants income later. Which statement is correct?

31.Which facts must a suitable annuity recommendation consider?

32.A slide says every annuity owner in the country has the same free-look period. What is wrong with teaching that as a national rule?

33.A poster says every guaranty association covers annuities up to the same dollar cap. What is the problem with that statement?

34.Marisol wants income that starts next month and continues for life. She has a lump sum she will not need for emergencies. Which product matches that reason?

35.This contract imposes a 5 percent surrender charge on $60,000 taken above the free amount. What is the charge?

36.In this contract the cap is 5 percent. The index rises 12 percent. The client believes he owns the stocks and should receive the full rise. Which statement is correct?

37.This contract allows a 10 percent free withdrawal of a $120,000 value. Hugh withdraws $12,000 during the surrender period. How much is exposed to a surrender charge?

38.Which recommendation is unsuitable?

39.On a nonqualified immediate annuity, the exclusion ratio excludes 40 percent of each payment as a return of premium. The payment is $2,000. How is it split?

40.Iris owns an annuity inside an IRA. A coworker says it is nonqualified because Iris once paid tax on her wages. Which reply is correct?

41.A fixed annuity credits 3 percent, a rate set by the insurer. The owner withdraws more than the free amount during the surrender period and owes a charge. Which statement is correct?

42.A contract offers a 2 percent premium bonus and an eight-year surrender charge. Paula needs half of her $40,000 premium for surgery in four months. Which conclusion is correct?

43.In this contract the cap is 7 percent and participation is 100 percent, with no spread. The index rises 10 percent. What is credited?

44.Chris is 52 and wants to set aside $20,000 he will not need until income starts in about fifteen years. He can accept the surrender period. Which use matches that goal?

45.Which transfer can receive Section 1035 treatment without current tax on the gain?

46.Jonah accepts that his account can go down. He wants investment options inside an annuity, has a long horizon, and does not need the premium soon. Which product can fit?

47.An 8 percent surrender charge applies to $25,000 withdrawn above the free amount. What is the charge?

48.In this contract the floor is 0 percent and the cap is 6 percent. The index rises 3 percent. What is credited?

49.Grace is 77 and must spend $18,000 of a $20,000 nest egg within a year. An indexed annuity has a 0 percent floor in this contract and a nine-year surrender charge. Which statement is correct?

50.On Leo's nonqualified immediate annuity, 25 percent of each payment is excluded and the rest is taxable earnings. Each payment is $800. How much of one payment is taxable?

51.A fixed annuity credits a rate set by the insurer. The client asks what stands behind that promise. Which statement is correct?

52.This contract allows a 10 percent free withdrawal of a $90,000 account value. What is the free amount?

53.Which exchange can be made without current tax on the gain under Section 1035?

54.Kim's account value is $40,000. This contract allows a 10 percent free withdrawal. She withdraws $24,000, and a 5 percent charge applies to the excess. What is the charge?

55.Which feature marks an immediate annuity?

56.The investment options in a variable annuity fall by 20 percent. The owner has no extra benefit that changes this result. What is true?

57.In this contract the participation rate is 25 percent, with no cap and no spread. The index rises 12 percent. What is credited?

58.In this contract a 3 percent spread applies to a positive index change, and there is no cap. The index rises 9 percent. What is credited?

59.A client in a high tax bracket wants tax-deferred growth and will not need withdrawals for many years. She accepts a rate set by the insurer and keeps emergency cash separate. Which point supports a fixed deferred annuity?

60.This contract states a 15-day free-look period. Which use of that number is acceptable?

61.An agent replaces a client's annuity every year to earn a new commission. Each time the client pays a surrender charge and gains no new benefit. Which description is correct?

62.In this contract the surrender charge in year 4 is 4 percent. In that year, $50,000 is withdrawn above the free amount. What is the charge?

63.Which statement about Section 1035 is correct?

64.In this contract the floor is 0 percent. The index falls 5 percent. The client fears the account will drop by that same 5 percent because of the index. What is credited from that index result?

65.Paul's account value is $60,000. This contract allows a 10 percent free withdrawal. He withdraws $18,000 during the surrender period. How much is exposed to a surrender charge?

66.Which product credits a rate set by the insurer, with the insurer bearing the investment risk?

67.A case file states, only for this client, that income from this qualified annuity is set to start at age 75. The client is 74 and will need the funds next year. Which use of that fact is correct?

68.In this contract the cap is 8 percent, with no spread and with 100 percent participation. The index rises 8 percent. What is credited?

69.Which purchase creates a nonqualified annuity?

70.Yvonne's annuity is still inside a surrender period. Replacement would cost $2,000. She documents a new benefit worth more to her than $2,000, gives up no benefit she uses, and does not need the funds soon. Which statement fits?

71.A 6 percent surrender charge applies to $30,000 withdrawn above the free amount. What is the charge?

72.Owen pays a premium, and income will not start until he elects it after ten years of accumulation. Which label fits?

73.In this contract the floor is 0 percent and the cap is 9 percent. The index falls 2 percent. What is credited?

74.Ruth keeps $12,000 for emergencies and has another $100,000 she can lock away. Her near-term bills are covered by the $12,000. She wants the insurer to set the rate. Which recommendation can fit?

75.A 9 percent surrender charge applies to $20,000 withdrawn above the free amount. What is the charge?

76.Which statement matches Section 1035?

77.Sara's account value is $100,000. This contract allows a 10 percent free withdrawal. She withdraws $35,000, and an 8 percent charge applies to the excess. What is the charge?

78.Which client is a poor match for a variable annuity?

79.An indexed annuity is sold at a bank. The client asks what the contract actually is. Which answer is correct?

80.On a nonqualified immediate annuity, 50 percent of each payment is excluded under the exclusion ratio. Each payment is $500. How is one payment split?

81.A 3 percent surrender charge applies to $40,000 withdrawn above the free amount. What is the charge?

82.Caleb wants lifetime income starting in 30 days and does not want investment options that can fall. He has a separate emergency fund. Which product matches that reason?

83.A 2 percent surrender charge applies to $50,000 withdrawn above the free amount. What is the charge?

84.In this contract the cap is 4 percent. The index rises 11 percent. What is credited?

85.This contract allows a 10 percent free withdrawal of a $70,000 value. Ned needs $7,000 for a car repair and will withdraw nothing more during the surrender period. Which statement is correct?

86.A proposed replacement of an annuity still in its surrender period would drop a benefit the client uses and would cost $3,500. The new contract replaces none of that benefit. Which conclusion is correct?

87.Which annuity is qualified?

88.In this contract a 2 percent spread applies to a positive index change, and there is no cap. The index rises 6 percent. What is credited?

89.A 10 percent surrender charge applies to $15,000 withdrawn above the free amount. What is the charge?

90.An agent suggests a deferred annuity to a 45-year-old who has a separate emergency fund, a long horizon, risk tolerance that matches the product, a reviewed tax status, and a goal of future income. What makes that recommendation suitable?

91.Alice's account value is $40,000. This contract allows a 10 percent free withdrawal. She withdraws $14,000, and a 4 percent surrender charge applies to the excess. What is the charge?

92.A variable deferred annuity accumulates in investment options the owner selected. Before any income starts, those options drop. Which statement is correct?

93.In this contract the participation rate is 80 percent, with no cap and no spread. The index rises 5 percent. What is credited?

94.A client asks to move an annuity into a life policy and avoid current tax on the gain under Section 1035. What should the agent say?

95.A contract takes one premium, and the first income payment is due eleven months later. There is no multi-year accumulation before that payment. Which description fits?

96.A fixed annuity is bought through a bank. The credited rate is set by the insurer. Which statement is correct?

97.A 7 percent surrender charge applies to $20,000 withdrawn above the free amount. What is the charge?

98.Mia is 58. She can leave $50,000 untouched for a decade, wants the insurer to set the rate, and keeps separate cash for emergencies. Which choice fits her?

99.In this contract the floor is 0 percent and the cap is 10 percent. The index rises 1 percent. What is credited?

100.On a nonqualified immediate annuity, 60 percent of each payment is excluded. Each payment is $2,000. How is one payment split?

101.The account value is $40,000. This contract allows a 5 percent free withdrawal. What is the free amount?

102.Which sale is unsuitable?

103.Under Section 1035, which exchange can be made without current tax on the gain?

104.In this contract a 4 percent spread applies and there is no cap. The index rises 10 percent. The client thinks he owns the stocks. Which statement is correct?

105.An agent wants one guaranty-association dollar cap to quote for annuities in every state. What is the right training point?

106.An 8 percent surrender charge applies to $12,500 withdrawn above the free amount. What is the charge?

107.David's account value is $200,000. This contract allows a 10 percent free withdrawal. He withdraws $50,000, and a 6 percent charge applies to the excess. What is the charge?

108.In this contract the cap is 6 percent and the floor is 0 percent. The index rises 10 percent. The client is 70 and needs the entire premium next month for a move. Which statement is correct?