Question 81

Deferred annuity is a savings instrument designed to first accumulate funds and then systematically to liquidate the funds.

A deferred annuity accumulates funds over time through premiums paid, and later allows for systematic withdrawals or payouts, typically during retirement. This makes it uniquely suited to the question's requirements.

A) Term life.

Term life insurance provides coverage for a specific period and pays a death benefit if the insured passes away within that term. It does not accumulate cash value or liquidate funds, thus it is not applicable as a savings instrument.

B) Deferred annuity.

Deferred annuities are specifically structured to first accumulate funds through investments and then provide a stream of income over time. This characteristic makes them ideal for individuals looking to save for retirement and then systematically liquidate their savings.

C) Mortgage insurance.

Mortgage insurance protects lenders in case of borrower default but does not serve as a savings vehicle. It does not accumulate or liquidate funds for the policyholder, which disqualifies it from being the correct answer.

D) Disability income insurance.

Disability income insurance provides income replacement in the event of a disability but does not accumulate or liquidate funds as a savings instrument. It focuses on providing financial support rather than serving as a means of savings accumulation.

Conclusion

The deferred annuity is the only option that meets the criteria of accumulating funds and then systematically liquidating them. Other options fail to fulfill the dual role of saving and cashing out, as they either provide insurance coverage or income protection without the savings component.