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 wants to mitigate the risk that their annuity income will be insufficient if they require long-term care. Which rider addresses this need?
Answer: Long-term care or confinement benefit rider
A long-term care or confinement benefit rider accelerates or increases annuity distributions if the annuitant is confined to a nursing facility or requires qualifying care.
When conducting a risk assessment for an annuity recommendation, which factor distinguishes 'risk tolerance' from 'risk need'?
Answer: Risk tolerance is emotional comfort with volatility; risk need is the return required to meet financial goals
Risk tolerance is a subjective psychological preference for accepting uncertainty, while risk need is the objective minimum return required to fund the client's financial goals.
A client's fixed annuity carrier is downgraded from A+ to B by AM Best. What is the MOST appropriate advisor response?
Answer: Reassess counterparty risk and determine whether surrender charges or state guaranty coverage make switching advisable
A rating downgrade warrants reassessing the carrier's financial stability, weighing potential insolvency risk against surrender charge costs and available guaranty association coverage.
Which annuity structure is BEST suited to mitigate the risk that a client dies shortly after annuitizing, leaving no value for heirs?
Answer: Life annuity with 20-year period certain
A life annuity with a 20-year period certain guarantees payments to heirs for the remainder of the 20-year term if the annuitant dies early, protecting against complete loss of principal.
A married client wants to ensure their spouse receives 100% of annuity income if the client dies first. Which survivor benefit percentage should be selected?
Answer: 100% joint and survivor
Selecting a 100% joint and survivor option guarantees the surviving spouse receives the same full payment amount for their lifetime after the primary annuitant's death.
Which regulatory requirement obligates annuity advisors to document the specific reasons a recommended annuity is suitable for a particular client?
Answer: NAIC Suitability in Annuity Transactions Model Regulation
The NAIC Suitability in Annuity Transactions Model Regulation requires advisors to document suitability determinations including client profile data and the basis for each annuity recommendation.
A client has $800,000 in a deferred annuity and needs $100,000 for a medical emergency. The contract has a 6% surrender charge and a 10% free withdrawal provision. What is the most cost-effective withdrawal approach?
Answer: Withdraw the full $100,000 and pay surrender charges on the excess
Withdrawing $80,000 free plus $20,000 subject to a 6% charge ($1,200 penalty) is far less costly than surrendering the entire contract or missing the full $100,000 need.