Michigan Variable Annuities Practice Test

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• Who receives the proceeds after the death of the annuitant?
• Which of the following charges is deducted from the premium of a variable product?
• Which tests may be used for a GMWB rider?
• Which statement about a guaranteed death benefit is true?
• A 1035 exchange can trigger which of the following?
• What is a rider in a variable annuity?
• GMIB payout is typically determined by which factor?
• Section 457 Plans are exempt from ERISA and distributions may NOT be rolled into an IRA.
• The guaranteed minimum income benefit (GMIB) guarantees what?
• Annuity is a contract in which the insurer agrees, for a price, to make regular payments to an individual for life or a fixed period. Which term describes this contract?
• Are personal life insurance dividends taxable?
• Which option describes a refund option?
• What is suitability and why is it critical for variable annuities in Michigan?
• In variable life products, where is the account value held?
• Which statement is true about Section 457 Plans?
• How are taxes on earnings inside a variable annuity treated?
• Nonforfeiture guarantee protects against which of the following?
• Which describes the Income investment objective?
• In a variable life policy, the cash values are maintained where, and who bears the investment risk?
• What is the difference between accumulation value and benefit base for riders?
• Which annuity option guarantees payments for life and pays remaining basis if death occurs before total payments equal basis?
• What is the investment management fee in a variable life or variable annuity contract?
• How do Whole Life and Universal Life differ most notably?
• When evaluating a variable annuity with guarantees, why should rider fees be weighed against the value of guaranteed benefits?
• What are investment subaccounts in a variable annuity?
• What causes accumulation unit value to change?
• Which organization is responsible for mandating a 24-month period for exchange privileges?
• Which description best characterizes Universal Life Insurance?
• During the accumulation period, what effect do new premium payments have on accumulation units?
• Under Section 1035 Exchanges, can a life insurance policy be exchanged for a qualified long-term care insurance policy?
• The exchange privilege for variable policies, as mandated by the SEC, applies for how many months?
• What is a 1035 exchange and when is it used?
• What is the importance of a sales illustration in a variable annuity sale?
• What is a Separate Account in the context of variable products?
• What is the purpose of surrender charge schedules in a variable annuity?
• Direct Method is an approach to managing a variable product's separate account that utilizes which type of investment company?
• Flexible Premium Variable Life is also known as what?
• Which action demonstrates compliance with suitability and disclosure standards in annuity sales?
• In a Money Purchase Plan, do contributions must be made every year?
• For variable products, how often must the separate account be valued?
• What is the variable death benefit in a fixed-premium variable life policy?
• Which statement accurately defines a prospectus?
• In a variable annuity, which statement is true regarding the account value and risk?
• Suitability Requirements pertain to which principle?
• In a sales illustration, what does a guaranteed value represent?
• During the annuity period, after annuitization, which statement is true about annuity units?
• When does the 10% early withdrawal penalty apply to annuity distributions?
• What disclosures must accompany a variable annuity illustration?
• When payouts begin, accumulation units are converted into annuity units. What is the correct description of this step?
• Fixed Annuity is defined as?
• Which description best matches the Direct Method in the context of variable products?
• Which annuity option guarantees payments for life with a guaranteed period if death occurs within that period?
• Which statement describes the minimum guaranteed death benefit (MGDB) again?
• Applying AIR to variable life affects which component?
• Which statement about surrender value and accumulation value is most accurate?
• What is a joint and survivor payout in a variable annuity?
• In a non-qualified annuity withdrawal, which portion is taxed as ordinary income?
• What describes a step-up feature in GMDB or GMIB riders?
• Which statement is NOT an IRA rollover rule?
• Which settlement option provides payments as long as both annuitants are living?
• Which statement best describes the General Account investments for fixed products?
• The variable annuity rider that guarantees a minimum annual withdrawal without surrender charges is known as:
• The period of time in a variable annuity when the owner receives payments is called what?
• Which of the following is a charge deducted from the separate account of a variable product?
• Which charge is deducted from the separate account and is specifically described as a risk fee?
• What does advertising compliance require in the context of variable annuities?
• What term describes the method of determining which part of an annuity payment is taxable and which part represents the tax-free return of the after-tax cost basis?
• Mortality Guarantee — which of the following best describes it?
• What is the purpose of the Assumed Interest Rate (AIR) in a variable annuity?
• Which feature guarantees that the payout will be at least the higher of the separate account balance or the sum of the purchase payments if death occurs during accumulation?
• Which statement accurately describes GMAV (guaranteed minimum account value) in a variable annuity?
• Which statement best describes the minimum guaranteed death benefit (MGDB) in variable life insurance?
• In a variable annuity, which statement about owner, annuitant, and beneficiary is true?
• Expense Guarantee is defined as what?
• How do withdrawals impact living benefit guarantees?
• Which risk is included in the typical risk disclosures for a variable annuity contract?
• Which statement best describes the tax treatment of a 1035 exchange?
• What is the typical range for surrender charge schedules in many contracts?
• Which item is not a charge assessed against the separate account?
• Which settlement option is described as payments based on mortality and interest calculations and continuing for as long as the annuitant lives?
• Which describes an Immediate Annuity?
• What is a surrender charge and how long does it usually last?
• In a combination annuity, where are the fixed portion and variable portion invested respectively?
• In a variable annuity, what is used as the measurement to determine each payment during the payout phase?
• What does a GMWB rider in a variable annuity guarantee?
• If the separate account return exceeds the AIR, what happens to product values?
• Refund option — which statement correctly describes its feature?
• Which statement about accumulation during unit value is true?
• Dual Licensure requires which licenses for someone who sells variable life or variable annuities?
• Which statement describes a Guaranteed Minimum Withdrawal Benefit (GMWB)?
• Which statement defines the role of a prospectus in variable product sales?
• Which statement best describes Life Income?
• How should an advisor handle potential conflicts of interest in annuity sales?
• What is surrender value?
• Which investment objective focuses on long-term capital appreciation rather than immediate income?
• What is a subaccount expense or expense ratio?
• Which objective describes growth in asset value over time with no guarantee of current income?
• How does reaching age 59½ affect tax rules for withdrawals from an annuity?
• Subaccounts are best described as which of the following?
• Which of the following is a premium deduction option?
• Which item is a premium deduction that is not a separate account charge?
• Annuity Units are used to determine the amount of each payment during the payout phase. When payouts occur, accumulation units are converted into annuity units. Which statement is correct?
• If a withdrawal from a life insurance policy is $12,000 and the policy's cost basis is $10,000, how much is taxable?
• What documentation should an advisor keep to demonstrate suitability for a variable annuity in Michigan?
• Which statement best describes replacement documentation in Michigan for variable annuities?
• Which topics are commonly covered on Michigan’s exam content for variable annuities?
• Which statement about a Tax Sheltered Annuity (TSA) is correct?
• How do subaccount fees affect long-term performance?
• Which payout option provides guaranteed payments for a period even if the annuitant dies early?
• What is the purpose of a death benefit rider in estate planning?
• When are taxes on earnings in a variable annuity paid?
• What is annuitization and when does it occur?
• Which of the following is not a guaranteed living benefit (GLB) in an annuity?
• Which is the correct definition of the Interest Only Option?
• Which set correctly lists charges deducted from the separate account?
• What is the purpose of the free-look period?
• Mortality expense is commonly described as what?
• How long is the free-look period for Michigan annuity contracts?
• Deferred Annuity is an annuity that starts sometime in the future. Which type is this?
• Fixed Amount Option describes which of the following?
• What describes a living benefit in a variable annuity?
• In a variable annuity rider, annual withdrawals are typically limited to what percentage of total premiums paid?
• Which statement best describes how rider fees affect a contract?
• Guaranteed Living Benefits (GLB) are particularly attractive to which group?
• How are qualified vs non-qualified annuities taxed differently?
• Flexible premium policies are described as which policy type?
• What is the maximum hypothetical rate of return allowed in sales illustrations for variable products?
• What is the role of advertising disclosures in annuities?
• Which statement describes variable life insurance?
• What is the insurer’s role in variable annuity guarantees?
• Which statement about a variable annuity illustration is true?
• Why is it important to review existing contracts before replacing them with new annuities?
• What is a death benefit (GMDB) in a variable annuity?
• Which statute requires insurer separate accounts to be registered as investment companies with the securities industry?
• Why is it important to understand the difference between owner and annuitant?
• If a life insurance policy has been transferred-for-value to another party by the policy owner, the death benefit is taxed like a full surrender. What is this transfer called?
• During accumulation, new premium payments change the number of accumulation units.
• Which term describes the charge the insurer uses to compensate for maintaining records, accounting, and reports generation under an insurance or annuity contract?
• What is a separate account in a variable annuity?
• What is the Mortality and Expense (M&E) risk charge?
• Which of the following is a separate account charge used to cover investment management?
• When surrendering a life insurance policy for its cash value, which portion is taxable?
• What is the penalty tax percentage on the excess amount for individuals who contribute more to their IRA than allowed each year?
• Which risk is specifically related to guarantees within a variable annuity contract?
• What is the risk management objective of a variable annuity with guarantees?
• Why is a Money Purchase Plan well-suited for organizations with relatively stable earnings?
• In a variable annuity, what is the purpose of the annuitant?
• If premiums paid for a policy totaled $5,000 and a $4,000 withdrawal was taken, what is the policy's cost basis?
• Which settlement option pays interest to the beneficiary while the principal is held by the insurer?
• Which statement about no-load designations is accurate?
• How does the term no-load apply to annuities?
• Which statement best describes a separate account in relation to variable contracts?
• What is a GMIB?
• Which factor affects contract rights and payout options in a variable annuity?
• Single payment deferred annuity (SPDA) is defined as which of the following?
• Which statement is true about the relation between the separate account and the General Account?
• Under Section 457 Plans, loans are available only to government plans.
• In the context of variable products, which statement best describes a separate account?
• Which feature can trigger annuitization automatically without explicit election?
• Which annuity settlement option provides the largest monthly income payment?
• What is the Assumed Interest Rate (AIR) in relation to separate accounts in a variable annuity?
• Death Benefit Guarantee in a variable annuity pays the beneficiary the higher of the separate account balance or the sum of the purchase payments if death occurs during the accumulation phase. Which term is this feature?
• What is a Guaranteed Minimum Death Benefit (GMDB)?
• Which statement best describes the target premium for flexible-premium products?
• Payout options affect life expectancy and payments; which statement is true?
• Which statement best describes a combination annuity?
• How are withdrawals from a Tax Sheltered Annuity taxed?
• Which statement best describes a Money Purchase Plan?
• Which statement describes Life Income with Period Certain?
• A Combined Annuity is described as being balanced and combines features of fixed and variable annuities. Which term describes this product?
• The exclusion ratio equals the annuity's cost basis divided by what?
• Which act requires insurer separate accounts to be registered as investment companies with the securities industry?
• What is the purpose of surrender charges in replacement disclosures?
• If personal life insurance dividends are kept in the policy to earn interest, how is the interest treated for tax purposes?
• What is the Indirect Method in managing a variable product's separate account?
• How do rider fees affect net returns?
• Annuitant is defined as the person who buys an annuity and may or may not be the policyowner and who receives the distributions from the annuity contract. Which term is this?
• What best describes the purpose of suitability requirements in selling variable products?
• In universal life insurance, mortality charges are based on what?
• Which item is commonly described as a charge to cover the insurer's cost of insurance and is deducted from the separate account?
• Which statement describes the accumulation phase of an annuity?
• Assumed Interest Rate (AIR) is the rate of growth built into an annuity table that determines payout on a variable annuity and provides a floor for gains. What does AIR stand for?
• Which set correctly lists charges deducted from the premium?
• Which settlement option provides payments as long as either annuitant is living?
• General Account is best described as which of the following?
• What is market risk in a variable annuity?
• Which statement best describes a Guaranteed Lifetime Withdrawal Benefit (GLWB) or GMWB?
• Which term describes a contract that combines features of fixed and variable annuities?
• Premiums paid into a variable annuity are credited as what, with accumulation units converted to annuity units at the end of the accumulation period?
• In a non-qualified annuity withdrawal, which portion is recovered tax-free first?
• Which statement best describes a variable annuity?
• When replacing an existing annuity with a new one, which disclosures must be provided?
• Do variable products guarantee any minimum rate of return?
• Which aspect of a death benefit rider helps preserve wealth for beneficiaries?
• Applying AIR to a variable annuity affects which components?
• Which statement correctly describes AIR and separate account returns?
• FPDA stands for Flexible Premium Deferred Annuity. Which statement best describes it?
• Fixed Period Option is described as?
• What is the term for the fee charged for professional investment advice in a variable contract?
• Which charge is intended to compensate for the insurer's risk in the policy?
• How long does the surrender period commonly last?
• Which of the following is typically included as evidence of suitability for a variable annuity?
• In a variable annuity, what primarily determines the contract value?
• Flexible Premium Variable Life is also known as Variable Universal Life. Which statement describes its key features?
• What annuity settlement option produces the largest monthly income guaranteed for life?
• Under what condition may the minimum death benefit in variable life be guaranteed?
• How do living benefit riders impact the contract's value and risk?
• Diversification is an investing technique characterized by buying a variety of different investments to spread market risk. Which statement best defines diversification?
• Accumulation period/units: If a $5,000 premium deposit is made into a variable annuity with unit price $5, how many accumulation units are purchased?
• Guaranteed minimum income payments (GMIP) ensure that each annuitized payment will be no less than what?