Life & Health Insurance Exam (National Portion)Life InsuranceMedium
An individual purchases an annuity to provide a guaranteed income stream starting immediately. The payments are fixed and will continue for the rest of their life. What type of annuity have they purchased?
- ADeferred Fixed Annuity
- BDeferred Variable Annuity
- CImmediate Variable Annuity
- DImmediate Fixed Annuity
Show answer & explanationAnswer & explanation
Correct answer: D. Immediate Fixed Annuity
An immediate annuity begins payments within one year of purchase. A fixed annuity provides guaranteed, level payments. Therefore, an Immediate Fixed Annuity fits the description.
Why the other options are wrong
- A. Deferred means payments start later; Fixed means payments are guaranteed and level.
- B. Deferred means payments start later; Variable means payments fluctuate.
- C. Immediate means payments start soon; Variable means payments fluctuate based on investments.
Immediate Fixed Annuity
An annuity that begins paying out a guaranteed, level income stream within one year of purchase, typically for the annuitant's lifetime.
- Payments start immediately (within 1 year)
- Payments are fixed and guaranteed
- Provides predictable income
Memory trick: Annuities are like streams of money: some start now, some later, some are steady, some flow with the market.