Michigan Variable Annuities Practice Test

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