Annuities
Annuity Basics for Insurance Licensing Exams
Fixed, variable, and indexed annuities — accumulation vs annuitization, surrender charges, and suitability themes.
Annuities are income engines. Deferred contracts accumulate; immediate contracts start payouts soon after premium. Fixed credits insurer-backed interest; variable uses separate accounts; indexed formulas use caps, floors, and participation rates.
Surrender charge schedules and free-withdrawal corridors control liquidity. Suitability asks whether the buyer’s horizon and cash needs survive those handcuffs.
Payout options trade income size for death protection: life-only vs life with period certain vs joint and survivor vs refund features.
Tax deferral is not “tax free forever.” Early distribution penalties and exclusion-ratio thinking show up on exams. Suitability documentation protects both the client and your license.