Question 67

A flexible premium deferred annuity allows multiple deposits.

A flexible premium deferred annuity is designed to accept varying amounts of deposits over time, providing the policyholder with the flexibility to contribute as their financial situation allows.

A) Multiple deposits

This option is correct because a flexible premium deferred annuity specifically permits the policyholder to make multiple deposits, rather than being restricted to a single premium payment. This characteristic is what distinguishes it from fixed premium annuities, allowing for increased contributions as desired.

B) Fixed premium

This option is incorrect as it describes a fixed premium annuity, which requires a set amount to be paid at regular intervals. A flexible premium deferred annuity, by contrast, allows for varying deposit amounts, making this option incompatible with the definition of a flexible premium product.

C) Immediate payouts

This option is also incorrect. A flexible premium deferred annuity is designed for deferred payouts, meaning that the annuitant does not receive immediate payments. Instead, it accumulates value over time before payouts begin, which is contrary to the nature of immediate annuities.

D) Guaranteed 6 % interest

This option is misleading. While some flexible premium deferred annuities may offer a guaranteed interest rate, not all do, and a 6% guaranteed interest rate is not a universal feature of these products. Thus, this option cannot be considered correct in the general context of flexible premium deferred annuities.

Conclusion

In summary, the correct answer is A, as it accurately reflects the defining characteristic of a flexible premium deferred annuity—allowing for multiple deposits. The other options either describe features of different types of annuities or misrepresent the nature of a flexible premium deferred annuity, reinforcing the importance of understanding the specific attributes of financial products.