Question 14

Funds are not invested in a separate account in a fixed annuity contract.

In a fixed annuity contract, funds are typically pooled in the insurance company's general account rather than a separate account, which distinguishes it from variable annuities.

A) Funds are invested in a separate account.

This statement is incorrect because fixed annuities do not involve investment in a separate account; instead, the premiums are invested in the insurer's general account, which is used to support guaranteed returns and benefits.

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

This statement is correct as fixed annuities provide a guaranteed minimum interest rate, assuring the policyholder of a certain return on their investment regardless of market conditions.

C) Benefit payments remain level.

This statement is also correct because fixed annuities typically offer level benefit payments throughout the annuity payout period, providing predictable income to the annuitant.

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

This statement is accurate as well, as fixed annuities can be structured to begin payouts immediately or at a future date, depending on the terms of the contract chosen by the policyholder.

Conclusion

The correct answer is A, as fixed annuities do not invest funds in a separate account, unlike variable annuities. Options B, C, and D accurately describe characteristics of fixed annuities, underscoring the unique features that differentiate them from other types of annuity products.