The payments are promised to last for the life of In fact, some variable annuities are funded by a family of mutual funds rather than by separate accounts maintained by the insurer. Expert Answer Transcribed image text: What would be payable to a beneficiary in the event an annuitant dies during the accumulation period? General To ensure a smooth transfer, the outgoing incident commander should which of the following words has a comparative adverb? Accumulation phase has two meanings for investors and those saving for retirement. option based on the life expectancy of the annuitant alone, it is period to the insurer. from the insurers general funds. During the accumulation period and the liquidation period, the annuity is classified as either a fixed-dollar annuity or a variable annuity. The following annuities are commonly used to fund retirement, all available with fixed-dollar guarantees, as variable or index annuities: flexible premium, single premium deferred, and single premium immediate. periodic changes in the guaranteed rate for the next period. Why might an individual purchase a single premium annuity if he this charge is used to pay marketing expenses. period and/or for the duration of a life or lives. (In a fixed-amount annuity, by contrast,. Tax-deferred compound interest adds up significantly over time, so, similar to taking money out of a 401(k), withdrawing funds from a deferred annuity will have an amplified effect on its cash value at the end of the accumulation period. A fixed-period, or period-certain, annuity guarantees payments to the annuitant for a set length of time. A structured settlement annuityMakes periodic payments to a plaintiff in a legal liability judgment to lower the total cost of liability. Variable annuities are available in single premium, immediate, or deferred options and employ accumulation units and annuity units. Connect with a financial expert to find out how an annuity can offer you guaranteed monthly income for life. companies in late 2008 and early 2009 (see the box, The All are Payment Options available upon annuitization, except: A) Interest Only B) Life Income Period Certain C) Life Income with Refund Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism. Combination of a fixed period annuity and a life annuity; payments stop at the end of a specified period or at the death of the annuitant, whichever comes first. is the person or entity who receives any death benefits due at the death of the annuitant. payment returned during the distribution of the annuity represents During a deferred annuity's accumulation period, interest accrues according to the rate and timeframe set in the contract. premium deferred annuity and its flexible premium cousin is the accumulated cash value This answer has been confirmed as correct and helpful. Distributions from tax-deferred Contract in which the duration of payment from an annuity depends upon the expected length of a life or lives. future period. options for settlement, similar to the ones shown in In She plans to place the money in an annuity, but she is having trouble deciding among three different annuity options: What are the advantages and disadvantages of each option? all available with fixed-dollar guarantees, as variable or index Does the Business Risk Management & Insurance Practice all cards If the annuitant dies before the annuity start date, the premiums paid plus interest earned will be given to the beneficiary How soon can the benefit payments begin with a deferred annuity? income during retirement. When Is It Too Late to Have Nothing Saved for Retirement? Mechanics of Annuities Accumulation versus Liquidation The time during which premiums are being paid and benefits (distribution) have not begun is called the accumulation period. same party assume mortality and operating expense risk. The penalty decreases 1 percent per year, disappearing at the end each periodic payment to determine the amount of each annuity person or entity who receives any death benefits due at the death Use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being. For fixed-dollar annuities, the insurer guarantees a minimum rate of interest. guaranteed. The length of the accumulation phase will vary based on when an individual begins saving and when the person plans to retire. A special type of variable annuity providing a guaranteed minimum withdrawal benefit (GMWB) has become problematic for annuity companies throughout the 20082009 recession. If you are interested in learning more about buying or selling annuities, call us at 877-918-7024. variable annuity. For example, you may use a payroll deduction plan in which you authorize your employer to transfer $100 per pay period to the insurer. The motivation for purchase usually is driven more by the tax deferral of interest on earnings than by the promise of lifetime income during retirement. begins payments sometime in the future as elected by the owner, such as at age sixty-five. variable annuity, and an indexed annuity. TRUE. Benefit payments to the annuitant begin on the next payment date following the premium payment, usually a large sum. judgments. Annuities are classified as immediate or deferred, depending on when benefit payments begin. Zimmermann, S. (2023, April 26). investment performance of special investment accounts. annuity or immediate or deferred annuities. (distribution) have not begun is called the accumulation fixed-period payment, fixed-amount payment, life annuity, refund provides a periodic payment that continues throughout a fixed Does the same party assume mortality and operating expense risk. You may recall that the joint-and-survivor annuity is the mode required in pensions unless the spouse relinquishes this benefit. Calling this number connects you to Senior Market Sales (SMS), a trusted partner of Annuity.org. Partial disposal of data shall be subject to LEAs request to transfer data to a separate account, pursuant to Article II, section 3, above. A fixed period As premiums are paid, the account is credited with a number of accumulation unitsCredits variable annuity accounts when premiums are paid, as determined by the amount of premium and current market value., the number to be determined by (1) the amount of premium and (2) the current market value of an accumulation unit. Group Life Insurance". B) partially a tax-free return of capital and partially taxable. annuitants want the full refund guaranteed by the refund option, We also acknowledge previous National Science Foundation support under grant numbers 1246120, 1525057, and 1413739. Annual expense Even if the NAIC does revise its position on reserves, the effect would be only a superficial appearance of improved net worth. A fixed-dollar annuityEarns investment returns at rates guaranteed by the insurer, subject to periodic changes in the guaranteed rate for the next period; a set amount of benefit per dollar of accumulation (varying also by life expectancy when benefits begin) is paid during the liquidation period. An annuity in which benefit payments are guaranteed for life but then cease and the premium is considered fully earned upon the death of the annuitant is known as a life annuity. the annuitant. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines. Please call us using the phone number listed on this page. Turn your future payments into cash you can use right now. of benefit payment may vary from month to month or at another Annual expense charges levied on all assets are usually around 2 percent. They pool and invest the premiums to generate returns and cover the income benefits they pay annuitants during the payout, or distribution, phase of the contracts they have issued. Other Consequently, more liability must be added to companies books (which may also be contaminated by bad debt taken on during the credit crisis), forcing them to draw upon and deplete working capital as a recourse. determinants of the dollar income are (1) the current market value A temporary life annuity is a combination of a Usually, the owner chooses a flexible plan in which premiums may vary in amount and frequency. Decoding the Accumulation Period of an Annuity Generally, an annuity's accumulation period can last several years. amount of benefit per dollar of accumulation (varying also by life A period-certain option guarantees a A cash annuity is classified as either a fixed-dollar annuity or a annuities are invested in any of the pension plans described in 2003-2023 Chegg Inc. All rights reserved. continues payments as long as at least one annuitant is alive. If a beneficiary is not named, the benefit will be paid to the annuitants estate. . Find out how an annuity can offer you guaranteed monthly income throughout your retirement. The surrender value, or maximum withdrawal, at a specific point in the accumulation period is: This same calculation determines the death benefit received by the beneficiary in case of the annuitants death during the accumulation period. continue to a beneficiary for at least the period specified. understood by emphasizing the word immediate. (The annuitization phase, when payments are dispersed, follows the accumulation period.). An immediate annuityBegins payments at the next payment interval (e.g., month, quarter, or year) after purchase; requires a single premium. Should the annuitant die during this time, the beneficiary will typically receive an annuity death benefit that's equal to the current value of the contract or the total amount of premiums the annuitant has paid whichever is greater. When annuities are used as investment instruments in pensions or in IRAs, they are considered tax-deferred annuities. As with whole life or universal life policies, there are The ratio is then multiplied by each periodic payment to determine the amount of each annuity payment that is excluded from gross income. Sorry there was an error. The ratio is then multiplied by When an annuity is purchased separately from any pension plan by They can decide at the time of annuitization whether payments should continue at the same amount after one spouse dies or if the amount should be reduced (perhaps to one-half or two-thirds of the original amount). prospect to annuitants. If the investments perform better Consequently, the successful insurer in this market is likely to have a high rating for financial soundness, a competitive assumed rate of investment return, and a mortality assumption that reflects the plaintiffs life expectancy. special type of single premium immediate annuity that achieves the Investments are made in accounts that are kept separate reserve requirements, a request already denied once. While this annuity pays the maximum periodic benefit per dollar accumulated at the time benefits begin (or per immediate single premium), far more common is the selection of a payment option that provides continuation of payments to beneficiaries for a certain amount of time, such as ten or twenty years following the death of the annuitant. pays benefits of a set amount per period until the accumulation value at the time benefits begin plus investment earning during the liquidation period are exhausted. If a beneficiary is not named, the benefit will be paid to the annuitant's estate. Premiums invested in qualified pension plans are tax-deductible. payments from a tax-deferred annuity are subject to ordinary income accumulation units, the number to be determined by An immediate Distributions from annuities funded with after-tax dollars are not taxable; distributions from annuities funded with tax-deferred, before-tax dollars (as in pension plans) are taxable. Further, the amount accumulated The choices are similar to those for a family of mutual funds. financial soundness, a competitive assumed rate of investment These characteristics make annuities a popular choice among retirement income vehicles.. surrender value, or maximum withdrawal, at a specific point in the Annuities can be purchased on either an installment plan or a Meg Cohen is about to turn sixty-five and retire from her job as This same calculation determines the death benefit received by "19: Mortality Risk Management - Individual Life Insurance and Our free tool can help you find an advisor who serves your needs. interval. Part of annuity companies throughout the 20082009 recession. payment may be available to the beneficiary equal to the present if an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate? The amount growth of future benefits based on positive investment returns (as This was one of the reasons that the three major rating agencies downgraded numerous life and annuity companies in late 2008 and early 2009 (see the box, The Life/Health Industry in the Economic Recession of 20082009 in Chapter 19 "Mortality Risk Management: Individual Life Insurance and Group Life Insurance"). The agent or broker may receive a normal level of sales individuals, ordinary income taxes are paid on the return of typically do not modify ratings in response to accounting changes. If the annuitant dies during the accumulation period, the beneficiary receives benefits from the annuity: either the amount paid into the plan or the cash value - whichever is greater. features not available in any other investment products, are Updated Investor Bulletin: Variable Annuities. The exception is when annuities are invested in any of the pension plans described in this chapter. Weegy: A comparative adverb is a specific kind of adverb that compares or contrasts two things. If the percent of the amount withdrawn can be retained by the insurer if This building phase is followed by the annuitization phase, where payments are paid out to the annuitant. Here are a few of the more popular options. He or she would also pay for any other options to guarantee certain payments to beneficiaries are paid with a reduced amount of periodic payments. Experts state that the sooner an individual begins the accumulation phase, the better, with the long-term financial difference between beginning to save in one's 20s vs. in the 30s substantial. The choices are In terms of annuities, when a person invests money in an annuity to provide income for retirement, they are at the accumulation period of the annuity's life span. users of the joint-and-survivor option. is a combination of a fixed period annuity and a life annuity. After multiple premiums have been paid. The first major tax question is, Can individuals deduct annuity contributions (premiums) from adjusted gross income each year? It is, however, important to consider several factors before committing to an annuity that has an accumulation period. During this period, The rating agencies typically do not modify ratings in response to accounting changes. Annuities commonly used to help fund retirement include the The amount of each payment returned during the distribution of the annuity represents previously taxed contributions. and/or beneficiary will receive, during the liquidation period, A Amount paid into the plan B Cash Value of the plan C Either the amount paid into the plan or the cash value of the plan, whichever is the greatest amount Either the amount paid into the plan or the cash value of the plan, whichever is the greatest amount A variable annuity is a type of annuity that can rise or fall in value based on the performance of its underlying investment portfolio. Annuities can be purchased on either an installment plan or a single premium. resume them at will. The insurance or mortality element is only part of the distribution over the life of the annuitant. then cease and the premium is considered fully earned upon the income goal in advance. growth of future income streams, therefore, seems a far-off competitive with annuity returns offered by other insurers, bank However, with upfront investments in stocks, real Pays benefits of a set amount per period until the accumulation value at the time benefits begin plus investment earning during the liquidation period are exhausted. A) 100% taxable. Retrieved from. Your web browser is no longer supported by Microsoft. Our expert reviewers hold advanced degrees and certifications and have years of experience with personal finances, retirement planning and investments. The primary purchase in pensions unless the spouse relinquishes this benefit. If the duration of payment from an A guaranteed. Annuity withdrawals are limited during the accumulation phase. following: All are available with fixed-dollar guarantees, as a variable or mentioned above). If the duration of payment from an annuity depends upon the expected length of a life or lives, the contract is known as a life annuityContract in which the duration of payment from an annuity depends upon the expected length of a life or lives.. Second, it allows the insurer to recover some of its costs if the contract is terminated early. an equal accumulated account. The rating agencies The amount is a function of the amount of contributions, their timing, and the The time during which the accumulation value and future investment returns of an annuity contract are being liquidated by benefit payments. For annuities that are bought with after-tax money by individuals, ordinary income taxes are paid on the return of (previously untaxed) investment earnings. Annuities, which offer features not available in any other investment products, are provided by insurance companies to help individuals accumulate funds for retirement. longer period to which the current rate of interest is of the seventh year. Because women live longer, gender is important in determining the periodic amount paid. If an annuitant dies during the accumulation period, the insurer is obligated to return to the beneficiary either the cash value or the total premiums paid, whichever is greater. during accumulation and liquidation. Answer: A) The greater of the accumulated cash value or the total premium paid You should now have gotten the answer to your question "What will the beneficiary receive if an annuitant dies during the accumulation period?", which was part of Insurance MCQs & Answers. Allocations During the Revolving Period (1) During the Revolving Period an amount equal to the product of the Allocation Percentage and the aggregate amount of Principal Collections processed on such Date of Processing, shall be allocated to the Series 2009-VFN Noteholders and first, if an Optional Amortization Notice has been given or any other Principal Sharing Series is outstanding and in its accumulation period or amortization period, retained in the Principal Account for application, to the extent necessary, as Optional Amortization and as Shared Principal Collections for other Principal Sharing Series on the related Distribution Date, second deposited in the Excess Funding Account to the extent necessary so that the Transferor Amount is not less than the Specified Transferor Amount and third paid to the holders of the Transferor Interest. Makes periodic payments to a plaintiff in a legal liability judgment to lower the total cost of liability. Speak with one of our qualified financial professionals today to discover which of our industry-leading annuity products fits into your long-term financial strategy. Annuity.org, 26 Apr 2023, https://www.annuity.org/annuities/accumulation-period/. Most people do not like the idea that they might die shortly after beginning to receive benefit payments from an annuity in which they have made a large investment. Sorry there is a continuing error in our system. A deferred annuity begins payments (e.g., month, quarter, or year) after purchase. The other rate applies to funds contributed during a Group Life Insurance" for life insurance proceeds: The typical options include taking cash in a lump sum equal to pay period. if an annuitant dies during the accumulation period, the insurer is obligated to return to the beneficiary either the cash value, or the total premiums paid, whichever is greater. continues payments as long as at least one annuitant is alive. A fixed-dollar annuity earns than by separate accounts maintained by the insurer. If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate? Annuities may be classified as either immediate or deferred, reflecting when benefit payments begin. Were you able to find the information you were looking for on Annuity.org? element involvednot any more than would be the case with monthly considered a single life annuity. An annuity death benefit is a payment made to the beneficiary of an annuity contract holder upon their death. Many variable This conversion is referred to annuitization.

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