Question 52

An immediate annuity typically makes its first benefit payment one month from the annuity's purchase date.

Immediate annuities are structured to begin payments almost immediately after purchase, which is commonly set to occur one month from the purchase date.

A) when the accumulation period of at least 24 months ends.

This option is incorrect because immediate annuities do not have an accumulation period; instead, they start payments shortly after the investment is made. The concept of an accumulation period applies primarily to deferred annuities, where funds grow before payouts begin.

B) in the form of a lump sum payment.

This option is incorrect as immediate annuities provide regular, periodic payments rather than a single lump sum. The purpose of an immediate annuity is to convert a lump sum investment into a stream of income for a specified period or for the lifetime of the annuitant.

C) only after all cash surrender values with interest have been calculated.

This option is incorrect because immediate annuities do not involve cash surrender values in the same way that other types of annuities do. Payments begin based on the terms of the annuity contract rather than waiting for any calculations related to surrender value.

D) one month from the annuity's purchase date.

This option is correct as immediate annuities are designed to start making benefit payments typically one month after the purchase. This feature distinguishes them from deferred annuities, which delay payments for a specified period.

Conclusion

The correct answer is option D, as immediate annuities are specifically intended to provide benefit payments shortly after purchase, usually within one month. All other options either misrepresent the structure and function of immediate annuities or apply concepts relevant to different types of annuities, making them incorrect.