Question 92

Funds are invested in a separate account.

Fixed annuity contracts do not invest funds in a separate account; instead, they typically invest in the insurer's general account, which is used to back the annuity's guarantees.

A) Funds are invested in a separate account.

This statement is incorrect because fixed annuities are backed by the insurer's general account rather than a separate account. The general account is used to provide the guaranteed interest rates and to fund the promised benefits.

B) The minimum interest rate is guaranteed in the contract.

This statement is correct because fixed annuities typically include a guarantee of a minimum interest rate, ensuring that the policyholder will receive at least that rate on their investment, regardless of market conditions.

C) Benefit payments remain level.

This statement is also correct. Fixed annuities generally provide level benefit payments, meaning that the amount received by the annuitant does not fluctuate over time, providing stability in income.

D) It may be sold as an immediate or deferred annuity.

This statement is correct as well. Fixed annuities can be structured as immediate annuities, where payments begin shortly after purchase, or as deferred annuities, where payments start at a later date.

Conclusion

The correct answer, option A, is definitively the only characteristic that does not apply to fixed annuity contracts, as they utilize the insurer's general account instead of a separate account for investments. Options B, C, and D accurately reflect essential features of fixed annuities, reinforcing why they are not the answer to the question.