NASAA Series 66 Uniform Combined State Law ExaminationInvestment Vehicle CharacteristicsMedium
A client is looking for an investment that offers tax-deferred growth potential, professional management, and a death benefit, but is concerned about the impact of inflation on fixed payments in retirement. Which of the following insurance-based products would be most suitable for this client?
- AUniversal Life Insurance
- BFixed Annuity
- CVariable Annuity
- DWhole Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: C. Variable Annuity
A variable annuity offers tax-deferred growth, professional management through subaccounts, and a death benefit. Critically, its payments can increase with market performance, providing a hedge against inflation, unlike a fixed annuity whose payments remain constant.
Why the other options are wrong
- A. Universal life insurance is flexible but primarily for death benefit and cash value, not designed for inflation-adjusted retirement income.
- B. Fixed annuities offer guaranteed payments but no inflation hedge.
- D. Whole life insurance is primarily for death benefit and cash value growth, not retirement income inflation hedging.
Variable Annuity
An insurance contract that provides tax-deferred growth and retirement income, with payments varying based on the performance of underlying investment subaccounts.
- Tax-deferred growth
- Professional management (subaccounts)
- Death benefit option
- Payments fluctuate with market (inflation hedge potential)
Memory trick: Insurance can secure your future, but 'variable' offers market upside.