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During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. For a retired person, which of the following investments would provide the greatest protection against inflation? As part of his profile, he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance and would opt for principal protection instead. The largest monthly check an annuitant can receive for the rest of his life is generated by a straight life (life income or life only) payout option. For anyone who may need access to the sum invested at a later time, a VA would not be considered a suitable recommendation. A)variable annuities may only be sold by registered representatives. regulated under both securities and insurance laws. A prospectus for a variable annuity contract: 1. \hspace{5pt}\text{Expense}&&\text{Credit}&\text{Debit}\\ Fixed income instruments, like bonds and fixed annuities, are subject to purchasing power risk. Many variable annuities invest the separate account in mutual funds. Similarly, CDs are insured, thereby eliminating risk and guaranteeing a return. D) unsuitable because her situation exposes her to surrender charges and early withdrawal penalties in exchange for insufficient benefits. used to escrow late or otherwise delinquent premium payments. A customer has an investment objective of keeping pace with inflation while assuming moderate risk. B) unsuitable because the return on something as conservative as a variable annuity tends to be low. We'll bring you back here when you are done. All of the following are characteristics of a variable annuity, except Reference: 12.3.2.1 in the License Exam. Copyright 2023, Insurance Information Institute, Inc. A registered representative explaining variable annuities to a customer would be CORRECT in stating that: 1. a VA guarantees an earnings rate of return, 2. a VA does not guarantee an earnings rate of return, 4. a VA does not guarantee payments for life. the producer is responsible for providing the applicant a summary of coverage that includes all of the following EXCEPT.