ON-Trac II Table of Contents INTRODUCTION & NAVIGATION INSTRUCTIONS UNIT XXIII-KSOK — ADVANCED ANNUITIES (KS & OK Only; Start Here) The States of Kansas and Oklahoma require that you complete one section of a self-study course at a time and pass a quiz, verifying that you have understood the material presented, before moving on to the next section. When you complete the section, fill out and submit the review request form at the end of the chapter. In response to your request, you will receive a link to the section review. Submit your answers and they will be scored. If you pass the review with a score of at least 70 percent, you will receive a link to the next section. If you do not pass the review, you will be requested to reread the section. Following, you will find the Table of Contents for the entire course, plus a link to our online CE map. Please click the link above to begin Section I of the Advanced Annuities (KS & OK Only) self-study course. TABLE OF CONTENTS CHAPTER 1: Annuities – Historical Development Page 1 – Annuities & Historical Development Table of Contents Page 2 – Important Note Page 4 – Introduction to Annuities Page 5 – Advantages of Annuities Page 6 – About This Course Page 7 – Historical Development of Annuity Contracts Page 9 – How they have evolved to the products and practices we see today as they relate to consumers. Page 11 – Products & Practices Page 12 – Market Overview CHAPTER 2: Introducing Types & Classifications of Annuities Page 15 – Introduce the Types of Annuities, Recognizing the Various Classifications of Annuities Page 16 – Annuity type according to when benefits are paid out. Page 16 – Define immediate annuity. Page 16 – Define deferred annuity. Page 16 – Distinguish between the characteristics of the two types. Page 17 – Annuity type according to how and when premiums are paid. Page 17 – Define single premium annuities. Page 18 – Define level premium annuities. Page 19 – Define flexible premium annuities. Page 19 – Distinguish between the characteristics of the types. Page 20 – Annuity type according to investment options offered. Page 20 – Define fixed annuities. Page 21 – Define variable annuities. Page 22 – Define indexed annuities. Page 22 – Distinguish between the characteristics of fixed, indexed, and variable annuities. CHAPTER 3: Parties to an Annuity Contract Page 23 – Identify the Parties to an Annuity Page 23 – Describe the rights and obligations of the annuity owner. Page 23 – Identify the entities eligible for annuity ownership. Page 24 – Distinguish the rights of the annuity owner in owner-driven contracts. Page 25 – Distinguish the rights of the annuity owner in annuitant-driven contracts. Page 26 – Describe the rights and obligations of the annuitant. Page 26 – Identify the entities eligible for the role of annuitant. Page 26 – Distinguish the role of annuitant in owner-driven contracts. Page 26 – Distinguish the role of annuitant in annuitant-driven contracts. Page 28 – Describe the rights and obligations of the insurance company. Page 28 – Distinguish obligations with insurance company issued non-qualified annuities. Page 28 – Distinguish obligations with insurance company issued annuities for individual retirement accounts, tax sheltered annuities, and qualified retirement plans. Page 29 – Introduce insurance rating services including, but not limited, to the following: Page 29 – A.M. Best Page 29 – Standard & Poor's Page 29 – Moody's Page 30 – Advertising Responsibilities (Section 787 of the CIC) Page 32 – Policy Cancellation & Refunds Page 34 – Describe the rights and obligations of the insurance producer. Page 34 – Disclosure Page 35 – Illustrations Page 36 – Replacement Page 37 – Free Look Period Page 38 – Importance of Reviewing Sample Contracts Page 39 – Describe the rights of and options available to beneficiaries. Page 39 – Identify the entities eligible for the role of beneficiary. Page 40 – Discuss the settlement options available to beneficiaries. Page 40 – As a Surviving Spouse Page 40 – As an Individual or Entity Other than a Surviving Spouse CHAPTER 4: How Fixed, Variable & Index Annuities Affect Consumers Page 44 – How Fixed, Variable & Index Annuity Contract Provisions Affect Consumers Page 44 – Identify and discuss contract provisions that are typically common to annuities. Page 44 – Interest Rates & Compensation Page 44 – First-Year Bonus "Teaser" Rates Page 45 – Issue Ages Page 46 – Maximum Ages for Benefits to Begin Page 47 – Crisis Waivers Page 47 – Nursing Home Page 47 – Terminal Illness Page 47 – Unemployment Page 47 – Disability Page 47 – Charges & Fees Page 48 – Premium Payments Page 49 – Settlement Options upon Death of Owner or Annuitant Page 49 – Tax: Qualified Plan Page 49 – Stretch Page 49 – Tax: Non-Qualified Plan Page 49 – Stretch Page 50 – Surrender Charges Page 51 – Market Value Adjustment Page 52 – Policy Administration Charges & Fees Page 52 – Withdrawal Privilege Options Page 53 – Annuitization Options Page 55 – Identify and discuss contract provisions that are typically common to fixed annuities. Page 56 – Death Benefits Page 56 – Lump-Sum vs. 5-Year Pay Out Page 56 – Provisions Page 59 – Charges & Fees Page 60 – Interest Rate Strategies Page 60 – Annual Page 60 – Multi-Year Page 61 – Crediting Methods Page 61 – Portfolio Rates Page 61 – New Money Rates Page 62 – Minimum Guaranteed Interest Rates Page 62 – Low Interest Rate Environment Impact on Interest Rates Page 63 – Identify and discuss contract provisions common to variable annuities. Page 64 – Variable Options Page 64 – Equity-Based Page 64 – Risk-Based Page 65 – Fixed Options Page 66 – Charges & Fees Page 67 – Dollar-Cost Averaging Page 68 – Explain annualized interest rate calculations on bonuses that apply to fixed accounts. Page 69 – Death Benefit Guarantees Page 70 – Living Benefit Guarantees Page 71 – Identify and discuss contract provisions common to indexed annuities. Page 72 – Primary Interest Crediting Strategies Page 72 – Monthly Averaging Page 72 – Point-to-Point Page 72 – Annual Point-to-Point Page 72 – Long-Term Point-to-Point Page 73 – High Water Mark Page 73 – Annual Resets Page 73 – Combination Methods Page 74 – Spreads Page 74 – Cap Rates Page 75 – Participation Rates Page 75 – Minimum Guaranteed Interest Rate Page 76 – Impact of Premature Surrender Charges Page 77 – Charges & Fees Page 78 – Identify and discuss available riders. Page 78 – Life Insurance Riders Page 78 – Long-Term Care Benefits Riders Page 78 – Terms of Riders Page 78 – Differentiate between Crisis Waivers & Long-Term Care Riders Page 78 – Loan Provisions CHAPTER 5: Taxation of Qualified & Non-Qualified Annuities Page 80 – Discuss Application of Income Taxation of Qualified & Non-Qualified Annuities in the Following Instances Page 81 – Payment of Premiums Page 82 – Cash Value Accrual Page 83 – Partial Withdrawals Page 84 – Loans & Assignments Page 85 – IRS Section 1035 Exchanges Page 86 – Gift of an Annuity Page 87 – Sale of an Annuity by the Owner Page 88 – Death of an Annuity Owner Page 88 – Death of an Annuitant Page 90 – Ordinary Income Tax Adjustment Page 91 – Annuity Benefits Distributions Page 92 – Discuss the exclusion ratio and its application in distribution calculations. Page 94 – Tax Effect on Beneficiary Estate Issues Page 95 – Disclaimer Page 95 – If a life agent offers to sell to a client any life insurance or annuity product, the life agent shall advise the client or the client's agent in writing that the sale or liquidation of this product may have tax consequences. Page 95 – The life agent shall disclose that the client may wish to consult independent legal counsel or financial advice before buying, selling or liquidating any assets being solicited or offered for sale. Page 95 – This course is not intended to provide advice with issues surrounding income and estate taxation of annuities. If expert tax assistance is required, life agents shall advise client to consult with other professionals. CHAPTER 6: Qualified Plans & Annuities Page 96 – Qualified Plans & Annuities Page 97 – Annuity Market & Buyer Demographics Page 99 – Annuities & Retirement Planning CHAPTER 7: The Primary Uses of Annuities Page 109 – Discuss Primary Uses of Annuities Page 110 – Tax-Deferred Compounding Page 111 – Discuss the proper way to compute taxable vs. tax-deferred vs. tax-free returns. Page 112 – Discuss the long-term effect of tax-deferred compounding vs. other available investment choices. Page 114 – Income Distributions Page 114 – Introduce the application of a split annuity in retirement planning. Page 115 – Introduce the various settlement options. Page 115 – Life Page 116 – Joint Survivor Page 117 – Period Certain Page 117 – Cash Refunds Page 118 – Discuss the advantages and disadvantages of annuitization options. Page 118 – Discuss the tax ramifications of annuitization options. Page 118 – Non-Qualified Annuitization Options Page 120 – Qualified Annuitization Options Page 121 – Advantages & Disadvantages Page 121 – Advantages of Annuities Page 121 – For Persons under 60 Years Old Page 124 – For Persons 60 Years Old & Older Page 126 – Surrender Charges Page 127 – Disadvantages of Annuities Page 127 – For Persons under 60 Years Old Page 129 – For Persons 60 Years Old & Older Page 131 – Surrender Charges Page 132 – Illustrate the advantages and disadvantages of the following types of investment. Page 132 – Alternatives to Annuities Including: Page 132 – Bonds Page 132 – CDs Page 132 – Commodities Page 132 – Investment Trusts Page 132 – Limited Partnerships Page 132 – Money Markets Page 132 – Mutual Funds Page 132 – Options Page 132 – Promissory Notes Page 132 – Real Estate Page 132 – Savings Page 132 – Stocks Page 132 – Viatical Settlements CHAPTER 8: The Senior Market Page 133 – The Senior Market Page 137 – Risk & the Senior Client Page 141 – Pre-Retirement vs. Post-Retirement Planning Page 147 – Financial Concerns Page 149 – Social Security Page 151 – Retirement Plan Distributions Page 153 – Investing Retirement Assets Page 155 – Insurance Concerns Page 155 – Health Page 162 – Long-Term Care Page 164 – Estate Planning Page 169 – Selling to the Senior Market Page 169 – Product Complexity Page 172 – The Issue of Buyer Competence Page 172 – The recognition of indicators that a prospective insured may lack the short-term memory or judgment to knowingly purchase an insurance product. Page 173 – Unique Ethics & Compliance Issues CHAPTER 9: Sales Practices for Producers Page 176 – Introduce Sales Practices for Producers Page 177 – Appropriate Advertising Page 177 – Advertising for Persons 65 Years Old & Older Page 177 – Definition of Advertisement: Envelopes, Stationery, Business Cards Page 178 – Required Information to Be Displayed Page 179 – Use of the Word "Insurance" Page 180 – License Number Page 180 – Seminars, Classes & Informational Meetings Page 181 – Required Information to Be Displayed Page 181 – Use of the Word "Insurance" Page 181 – License Number Page 182 –Direct Mailers Page 182 – Advertisements may not look like those of a government agency, non-profit or senior organization. Page 182 – Coverage not provided or endorsed by government agency, non-profit or senior organization. Page 182 – Advertiser is not connected with government agency, non-profit or senior organization. Page 182 – Coverage or advertiser is not related to government agency. Page 182 – Any person or entity that is exempt from licensure, or non-resident agents representing an insurer that is a direct response provider. Page 182 – Fines & Penalties Page 183 – Prohibited Sales Practices Page 183 – In-Home Solicitations: 24-Hour Notice Requirement for Persons 65 Years Old & Older Page 183 – Criteria Page 183 – For Persons 65 Years Old & Older Page 183 – Content of Written Notice Page 183 – Cannot Misrepresent True Content of Meeting Page 184 – Sharing Commissions with Attorney Page 184 – Unnecessary Replacement Page 185 – Define "Unnecessary Replacement." Page 185 – Pay a surrender charge. Page 185 – Examples of Unnecessary Replacement Page 186 – Define substantial financial benefit. Page 187 – Bait & Switch Page 187 – Pre-Text Interview: Definition & Examples Page 188 – Living Trust Mills & Pretext Interviews Notice, Commissioner Low Page 190 – Classic Trust Mill: Alliance for Mature Americans Page 191 – Long-Term Care Sales Page 191 – Unauthorized Practice of Law-Drafting, Delivering, Interpreting Legal Documents (Business & Professions) Page 192 – Cause for Suspension Page 192 – Loans Page 192 – Agent Beneficiaries Page 192 – Agent as Trustee Page 192 – Agent as Power of Attorney Page 192 – Benefits Payable to Family or Friends of Agent Page 192 – Exceptions Page 193 – Discuss the importance of determining client suitability for annuity sales (NAIC Senior Protection in Annuity Transactions Model Act & Regulation) Page 194 – Identify the need for information prior to making recommendations. Page 195 – The Consumer's Financial Status Page 195 – Income Page 195 – Liquid Assets Page 195 – Is comprehensive LTC insurance in place? Page 196 – The Consumer's Tax Status Page 197 – The Consumer's Investment Objectives Page 197 – Other Information to Be Used or Considered Relevant Page 199 – Discuss the need for full contract disclosure. Page 199 – Discuss the need for complete recordkeeping. Page 200 – Identify required disclosures. Page 200 – Policy Cancellations & Refunds Page 200 – Free Look for Persons 60 Years Old & Older CHAPTER 10: Reserving Issues with Annuity Contracts Page 202 – Reserving Issues with Annuity Contracts Page 209 – How They Differ with Other Life Insurance Contracts Page 210 – Limits Companies May Place on Annuity Sales Due to Reserving Issues Page 215 – How does this impact the consumer's decision in purchasing an annuity contract? Page 215 – How does the low interest rate environment impact reserving and annuity payouts and rates of return? CHAPTER 11: Consumer Attitudes Toward Retirement Page 218 – Consumer Attitudes Toward Retirement Page 220 – How does the utilization of annuities help fulfill consumer's retirement goals as compared to other financial planning vehicles? CHAPTER 12: The Role of State Life & Health Guarantees in Relationship to Annuities Page 228 – The Role of State Life & Health Insurance Guarantees in Relationship to Annuities Page 233 – Certificates of Completion, CE Credits & CE Map Page 234 – Exam Request View our online map to determine if your state has approved this course for Continuing Education credits and how many credits you can receive. Click this link, then click on your home state for a complete list. This course is accessible online 24 hours a day, 7 days a week. Student information will not be sold or distributed to any third party without prior written consent of the student. Registering and/or taking the course shall not constitute consent. 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