Question 88

The owner of a flexible premium annuity normally has the opportunity to vary the amount and timing of the premium deposits.

Flexible premium annuities allow the owner to adjust their contributions, enabling them to choose how much and when to deposit funds into the annuity.

A) alter the settlement option after benefit payments begin

This option is incorrect because once benefit payments commence, the settlement option typically cannot be changed. Owners must select their settlement option prior to the start of payments, making this choice inflexible.

B) change the individual named as the primary annuitant

This option is also incorrect. The primary annuitant is usually designated in the contract and changing this designation is often restricted, particularly after the annuity has been issued, thus limiting flexibility.

C) vary the amount and timing of the premium deposits

This option is correct as flexible premium annuities are designed specifically to allow owners to make varying contributions over time. This flexibility lets investors adapt their investment strategy based on their financial situation and goals.

D) avoid surrender charges on all withdrawals of principal

This option is incorrect. Surrender charges are typically applied to withdrawals made during the early years of an annuity contract. Therefore, not all withdrawals of principal are exempt from these charges, indicating limited flexibility in accessing funds without cost.

Conclusion

The correct answer, option C, highlights the key feature of flexible premium annuities, which is the ability to adjust premium payments. In contrast, options A, B, and D each outline restrictions or incorrect assumptions about annuity features, emphasizing the significance of understanding the terms of annuity contracts.