RAA Annuity Riders & Optional Benefits 2

Question 1

What is the key distinction between a Guaranteed Lifetime Withdrawal Benefit (GLWB) and a standard GMWB rider?

Accepted Answer

A GLWB guarantees that withdrawals continue for the owner's entire lifetime, even after the account value is depleted

Answer

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.

Question 2

Under a long-term care (LTC) rider on an annuity, benefits are typically triggered when the owner:

Accepted Answer

Cannot perform a specified number of Activities of Daily Living (ADLs) or has severe cognitive impairment

Answer

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.

Question 3

What does a 'doubler' or 'multiplier' feature in an annuity LTC rider typically do?

Accepted Answer

The monthly income benefit doubles once qualifying long-term care conditions are met

Answer

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.

Question 4

Which factor most directly affects the pricing of a Guaranteed Minimum Income Benefit (GMIB) rider?

Accepted Answer

The prevailing interest rate environment and the owner's age at annuitization

Answer

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.

Question 5

When comparing GLWB riders across different annuity contracts, which element most significantly affects the benefit's long-term value?

Accepted Answer

Whether the benefit base grows at simple or compound interest during the deferral period

Answer

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.

(RAA) Registered Annuity Advisor Practice Test

(RAA) Registered Annuity Advisor Practice Test

RAA Annuity Riders & Optional Benefits 2