Annuity Riders & Optional Benefits Flashcards
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Read the first 7 Annuity Riders & Optional Benefits flashcards as text
What does a Guaranteed Minimum Withdrawal Benefit (GMWB) rider primarily guarantee?
Answer: A minimum percentage of the benefit base can be withdrawn annually regardless of account performance
A GMWB rider guarantees that the contract holder can withdraw a minimum percentage (typically 5–7%) of the benefit base each year, even if the account value drops to zero.
Which death benefit rider guarantees that a beneficiary will receive at least the total premiums paid into the contract?
Answer: Return of Premium Death Benefit rider
A Return of Premium Death Benefit rider guarantees that the beneficiary will receive at least the total premiums paid, protecting against market losses at the time of the owner's death.
What is the primary purpose of a Guaranteed Minimum Accumulation Benefit (GMAB) rider?
Answer: To ensure the account value will reach a specified minimum after a defined holding period
A GMAB rider guarantees that the contract's account value will be at least a specified minimum amount—often 100% of premium—after a defined accumulation period, typically 7–10 years.
The 'step-up' feature in a Guaranteed Minimum Death Benefit (GMDB) rider means the death benefit:
Answer: Locks in at the highest account value on each contract anniversary
The step-up (or ratchet) feature in a GMDB rider periodically locks in the highest account value achieved at each contract anniversary, ensuring the death benefit reflects market gains even if the account later declines.
Which of the following best describes an income rider's 'benefit base' on a deferred annuity?
Answer: A separate notional value that grows at a guaranteed rate and is used to calculate future income payments
An income rider maintains a separate benefit base (often called an income account value) that grows at a guaranteed rate and is used to calculate guaranteed lifetime withdrawal payments, distinct from the actual account value.
What is the typical annual cost range for adding an income benefit rider to a variable annuity?
Answer: 0.50% to 1.50% of the benefit base annually
Income benefit riders typically cost between 0.50% and 1.50% of the benefit base or account value annually, reducing overall investment return but providing guaranteed income protection.
A 'waiver of surrender charge' rider is most likely triggered by which event?
Answer: The owner being confined to a nursing home or requiring qualifying long-term care
Waiver of surrender charge riders—also called nursing home waivers—typically allow penalty-free withdrawals when the owner is confined to a nursing home or requires qualifying long-term care, providing liquidity in medical emergencies.