Question 2

When annuity benefit payments begin.

The difference between deferred and immediate annuities is determined by when the annuity benefit payments start. Deferred annuities begin payments at a later date, while immediate annuities provide payments right away.

A) When annuity benefit payments begin.

This option is correct as it directly addresses the key distinction between deferred and immediate annuities. Deferred annuities allow the investor to accumulate funds over time before receiving payments, whereas immediate annuities start disbursing payments shortly after the initial investment.

B) The number of annuity benefit payments.

This option is incorrect because the number of payments does not define whether an annuity is deferred or immediate. Both types of annuities can have varying numbers of payments, but this factor does not distinguish them.

C) Who receives the annuity benefit payments.

This option is also incorrect as it pertains to beneficiaries rather than the timing of the payments. The recipient of the payments does not influence whether the annuity is categorized as deferred or immediate.

D) The dollar amount of the annuity benefit payments.

This option is incorrect since the amount of the payments does not determine the classification of the annuity. Both deferred and immediate annuities can have different payment amounts regardless of their type.

Conclusion

The correct answer, A, clearly identifies the timing of payments as the defining characteristic between deferred and immediate annuities. All other options fail to address the core aspect of payment timing, which is essential for understanding the distinction between these two types of annuities.