Question 86

Funds are invested in a separate account.

A fixed annuity contract does not have its funds invested in a separate account; rather, it typically invests in the general account of the insurance company, which is subject to state regulations.

A) Funds are invested in a separate account.

This statement is incorrect as a characteristic of a fixed annuity contract. Fixed annuities are generally backed by the insurer's general account, which invests in conservative assets like bonds, rather than being allocated to a separate account that may have variable investment options.

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

This statement correctly describes a characteristic of fixed annuities. They typically offer a guaranteed minimum interest rate, providing security to the policyholder against market fluctuations.

C) Benefit payments remain level.

This statement is also true for fixed annuities. The benefit payments from a fixed annuity are designed to remain stable and predictable over time, making it easy for policyholders to plan their finances accordingly.

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

This statement accurately reflects a characteristic of fixed annuities. They can be structured as either immediate annuities, which begin payments right away, or deferred annuities, which start payments at a later date.

Conclusion

The correct answer is A because fixed annuities are not invested in separate accounts but rather in the insurer's general account. Options B, C, and D accurately reflect characteristics of fixed annuities, highlighting their guarantees and payment structures, which distinguishes them from variable annuities that involve separate accounts.