76. Which of the following is a feature of a single-premium deferred annuity?
Answer: B
A single-premium deferred annuity features a lump-sum deposit.
A single-premium deferred annuity is designed for individuals to make a one-time payment, or lump-sum deposit, which then grows over time before any distributions begin.
A) Immediate income
Immediate income is not a feature of a single-premium deferred annuity, as these annuities are structured to defer income until a later date. Immediate annuities, in contrast, begin payouts shortly after the initial investment.
B) Lump-sum deposit
A lump-sum deposit is a defining feature of a single-premium deferred annuity. This type of annuity allows the investor to contribute a single payment upfront, which is then invested and can grow over time until the annuitant decides to begin receiving payments.
C) Guaranteed death benefit equal to face amount
While some annuities may provide a death benefit, it is not a defining feature of single-premium deferred annuities. The specifics of death benefits can vary widely based on the product and issuer, and many do not guarantee a death benefit equal to the face amount.
D) No surrender charges
Surrender charges are typically associated with the early withdrawal of funds from annuities. Single-premium deferred annuities may have surrender charges, especially if the investor withdraws funds within a certain period, making this option incorrect.
Conclusion
The correct answer, a lump-sum deposit, highlights the fundamental aspect of single-premium deferred annuities, distinguishing them from other types of annuities that may involve multiple payments or immediate income. All other options either mischaracterize the features of this product or present conditions that do not apply to single-premium deferred annuities.