RAA Annuity Riders & Optional Benefits 1

Question 1

What does a Guaranteed Minimum Withdrawal Benefit (GMWB) rider primarily guarantee?

Accepted Answer

A minimum percentage of the benefit base can be withdrawn annually regardless of account performance

Answer

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.

Question 2

Which death benefit rider guarantees that a beneficiary will receive at least the total premiums paid into the contract?

Accepted Answer

Return of Premium Death Benefit rider

Answer

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.

Question 3

What is the primary purpose of a Guaranteed Minimum Accumulation Benefit (GMAB) rider?

Accepted Answer

To ensure the account value will reach a specified minimum after a defined holding period

Answer

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.

Question 4

The 'step-up' feature in a Guaranteed Minimum Death Benefit (GMDB) rider means the death benefit:

Accepted Answer

Locks in at the highest account value on each contract anniversary

Answer

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.

Question 5

Which of the following best describes an income rider's 'benefit base' on a deferred annuity?

Accepted Answer

A separate notional value that grows at a guaranteed rate and is used to calculate future income payments

Answer

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.

(RAA) Registered Annuity Advisor Practice Test

(RAA) Registered Annuity Advisor Practice Test

RAA Annuity Riders & Optional Benefits 1