Question 67

A flexible premium deferred annuity allows multiple deposits.

A flexible premium deferred annuity permits the policyholder to make multiple contributions to the annuity over time, rather than requiring a single lump-sum payment. This feature provides greater flexibility for individuals looking to invest funds at different intervals.

A) Multiple deposits

This option is correct because a flexible premium deferred annuity is designed to accept multiple payments from the policyholder, allowing them to contribute varying amounts at their discretion. This flexibility is a key characteristic that distinguishes it from other types of annuities, which may have stricter payment requirements.

B) Fixed premium

This option is incorrect as a fixed premium annuity requires the policyholder to make consistent payments of the same amount at regular intervals. Unlike flexible premium deferred annuities, fixed premium annuities do not allow for varying payment amounts.

C) Immediate payouts

This option is also incorrect. A flexible premium deferred annuity is structured to accumulate funds over time before payouts begin, which typically occur at a later date, rather than providing immediate payouts. Immediate annuities, on the other hand, start payments shortly after the initial investment.

D) Guaranteed 6% interest

This option is incorrect because not all flexible premium deferred annuities come with a guaranteed interest rate of 6%. Interest rates can vary based on the terms of the contract and the issuing insurance company, and there is no universal guarantee of a specific rate.

Conclusion

The correct answer, multiple deposits, accurately reflects the primary feature of flexible premium deferred annuities, allowing for varying payment amounts. In contrast, the other options misrepresent the characteristics of this type of annuity, emphasizing fixed payments or immediate payouts that do not apply in this context.