Risk Assessment & Mitigation Flashcards
7 cards from real RAA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Risk Assessment & Mitigation flashcards as text
A client is concerned about the risk of outliving income if they live past age 90. Which annuity payout option is specifically designed to eliminate this concern?
Answer: Life-only annuity
A life-only annuity provides guaranteed income for the annuitant's entire lifetime, no matter how long they live, directly mitigating longevity risk.
Rising interest rates after a client locks into a fixed annuity represent which type of risk?
Answer: Opportunity cost risk
When rates rise after locking in a fixed annuity, the client misses the opportunity to earn higher returns, representing opportunity cost (interest rate) risk.
A client's fixed annuity credited rate is 3% while inflation runs at 4%. Over time, what is the PRIMARY risk the client faces?
Answer: Purchasing power erosion
When the credited rate trails inflation, the real value of annuity payments declines each year, eroding the client's purchasing power.
Which annuity rider is specifically designed to protect a client's income base from stock market downturns in a variable annuity?
Answer: Guaranteed minimum income benefit (GMIB)
A GMIB guarantees a minimum income base that grows at a set rate regardless of subaccount performance, protecting against market downturns reducing future income.
A client asks how state guaranty associations protect annuity owners. What is the MOST accurate description of this protection?
Answer: They guarantee annuity values up to state-specified dollar limits if the insurer becomes insolvent
State guaranty associations cover annuity contract values up to statutory limits (commonly $250,000) in the event of insurer insolvency, with no federal backing.
A couple aged 65 and 62 wants income that continues as long as either spouse is alive. Which annuity option is MOST appropriate?
Answer: Joint and survivor annuity
A joint and survivor annuity continues payments for the lifetimes of both covered lives, ensuring income persists even after the first spouse dies.
Which risk assessment step involves reviewing a client's existing insurance policies, pensions, and Social Security before recommending an annuity?
Answer: Needs analysis / income gap analysis
An income gap analysis inventories all guaranteed income sources to determine how much additional guaranteed income an annuity needs to provide.