Michigan Variable Annuities Practice Test

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