13. An annuitant paid $100,000 for an annuity on June 1 and expects to receive lifetime benefit payments beginning on July 1. This is an example of which of the following annuities?
Answer: A
Single Premium Immediate
This scenario exemplifies a Single Premium Immediate annuity because the annuitant makes a one-time payment of $100,000 and starts receiving benefit payments almost immediately, beginning on July 1, just one month after the initial payment.
A) Single Premium Immediate
This option is correct as it accurately describes the arrangement where a single lump sum is paid upfront, and payments commence shortly thereafter. The immediate nature of the payments, beginning one month after the purchase, is a defining characteristic of this type of annuity.
B) Single Premium Deferred
This option is incorrect because a Single Premium Deferred annuity would involve a single payment with benefits starting at a later date, not immediately. In this case, since payments start just one month after the purchase, it does not fit the deferred classification.
C) Flexible Premium Immediate
This option is also incorrect. A Flexible Premium Immediate annuity allows for multiple premium payments with immediate benefit payouts. However, since the annuitant made only a single payment, this designation does not apply here.
D) Flexible Premium Deferred
This option is incorrect as well. A Flexible Premium Deferred annuity permits multiple contributions and delays benefit payments until a specified future date. Given that the payments begin shortly after the initial investment, it does not align with the characteristics of a deferred annuity.
Conclusion
The correct answer, Single Premium Immediate, is definitively right because it matches the structure of the annuity where a single payment leads to immediate benefit payments. All other options fail to describe the immediate nature of the benefits or involve multiple contributions, which are not applicable in this scenario.