Question 88

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

Flexible premium annuities allow owners to adjust their premium payments, which means they can choose how much to contribute and when to make those contributions, providing greater financial flexibility.

A) alter the settlement option after benefit payments begin

This option is incorrect because once benefit payments begin, the settlement option is typically fixed and cannot be altered by the owner. The terms established at the outset dictate how benefits will be disbursed, limiting changes to the settlement option thereafter.

B) change the individual named as the primary annuitant

This option is also incorrect. The primary annuitant is usually established at the time of the contract and cannot be changed without specific provisions in the annuity agreement. This is a critical aspect of the contract that ensures the identity of the annuitant remains consistent.

C) vary the amount and timing of the premium deposits

This option is correct as flexible premium annuities are designed to allow owners to adjust their contributions. This flexibility means that owners can respond to their financial situations by increasing or decreasing their premium payments as needed.

D) avoid surrender charges on all withdrawals of principal

This option is incorrect because flexible premium annuities typically impose surrender charges on withdrawals made within a certain period after the annuity is purchased. These charges are designed to discourage early withdrawals and protect the insurer's investment.

Conclusion

The correct answer, C, highlights the unique feature of flexible premium annuities, which is their adaptability in terms of premium contributions. Options A, B, and D misrepresent the contractual limitations associated with annuity agreements, while only C accurately reflects the owner's ability to modify premium payments.