Annuity Riders & Optional Benefits 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 Annuity Riders & Optional Benefits flashcards as text
What is the key distinction between a Guaranteed Lifetime Withdrawal Benefit (GLWB) and a standard GMWB rider?
Answer: A GLWB guarantees that withdrawals continue for the owner's entire lifetime, even after the account value is depleted
The defining feature of a GLWB is that guaranteed income payments continue for the owner's lifetime even if the account value reaches zero, providing true longevity protection beyond what a basic GMWB guarantees.
Under a long-term care (LTC) rider on an annuity, benefits are typically triggered when the owner:
Answer: Cannot perform a specified number of Activities of Daily Living (ADLs) or has severe cognitive impairment
LTC riders on annuities use the same eligibility criteria as standalone LTC policies under HIPAA: inability to perform 2 of 6 ADLs or severe cognitive impairment.
What does a 'doubler' or 'multiplier' feature in an annuity LTC rider typically do?
Answer: The monthly income benefit doubles once qualifying long-term care conditions are met
A doubler (or LTC enhancement) feature doubles the available monthly income payments once qualifying long-term care needs are established, providing enhanced liquidity when care is needed most.
Which factor most directly affects the pricing of a Guaranteed Minimum Income Benefit (GMIB) rider?
Answer: The prevailing interest rate environment and the owner's age at annuitization
GMIB rider costs are most directly influenced by the interest rate environment—which affects guaranteed annuitization rates—and the owner's age, which determines the actuarial life expectancy underlying the income guarantee.
When comparing GLWB riders across different annuity contracts, which element most significantly affects the benefit's long-term value?
Answer: Whether the benefit base grows at simple or compound interest during the deferral period
Whether the income benefit base grows by simple or compound interest has a dramatic impact over long deferral periods; compound interest produces substantially higher guaranteed income amounts than simple interest at the same stated rate.
A 'premium bonus' rider on a deferred annuity typically works by:
Answer: Adding an immediate percentage increase to the contract value at purchase, subject to a vesting schedule
Premium bonus riders credit an immediate percentage—often 5–10%—to the contract value at purchase, but these bonuses are typically subject to vesting schedules and may be offset by higher ongoing fees or lower base credited rates.
What is a 'spousal continuation' option in the context of annuity contracts?
Answer: A feature allowing a surviving spouse to continue the annuity contract under the original terms rather than taking a lump-sum death benefit
Spousal continuation allows a surviving spouse designated as the sole primary beneficiary to assume ownership of the annuity contract, preserving its tax-deferred status and any guaranteed benefits rather than receiving a lump-sum death benefit.