CAS CAS Annuity Riders and Contract Provisions

Question 1

What does a Guaranteed Minimum Income Benefit (GMIB) rider on a variable annuity guarantee?

Accepted Answer

The right to annuitize based on a minimum benefit base after a waiting period

Answer

A GMIB rider guarantees the contract holder the right to annuitize based on a minimum benefit base (often growing at a set rate) after a specified waiting period, regardless of actual account performance.

Question 2

Which annuity rider provides a guaranteed percentage increase to the benefit base each year the contract owner does not take withdrawals?

Accepted Answer

Rollup rider

Answer

A rollup rider (also called a deferral bonus or step-up rider) increases the benefit base by a guaranteed percentage — commonly 5–7% — each year the owner defers withdrawals.

Question 3

What is the primary purpose of a Return of Premium (ROP) death benefit rider on an annuity?

Accepted Answer

To ensure the death benefit is at least equal to total premiums paid

Answer

An ROP death benefit rider ensures that if the annuity owner dies and the account value is less than premiums paid, the beneficiary receives at least the total amount of premiums contributed.

Question 4

A Guaranteed Minimum Withdrawal Benefit (GMWB) rider on an annuity guarantees that the contract owner can withdraw:

Accepted Answer

A specified percentage of a benefit base annually until the premium is recovered

Answer

A GMWB rider guarantees the owner can withdraw a set percentage (e.g., 5–7%) of the benefit base each year until the total premiums paid are recovered, even if the account value drops to zero.

Question 5

Which annuity contract provision allows a policyholder to withdraw a portion of the contract value each year without triggering surrender charges?

Accepted Answer

Free withdrawal provision

Answer

The free withdrawal provision (commonly 10% per year) allows the annuity owner to take partial withdrawals up to a specified amount annually without incurring surrender charges.

(CAS) Certified Annuity Specialist Practice Test

(CAS) Certified Annuity Specialist Practice Test

CAS CAS Annuity Riders and Contract Provisions