CARD Q052
A retiree pays one premium for an annuity whose scheduled income begins next month. How is it classified by income starting time?
- Immediate annuity
- Life insurance with an interest-only settlement
- Deferred annuity
- Flexible-premium deferred annuity
Immediate annuity
Immediate describes when income begins, typically within a year of purchase. It does not identify whether returns are fixed or variable.
Why each choice is right or wrong
A. Immediate annuity
Correct. Immediate describes when income begins, typically within a year of purchase. It does not identify whether returns are fixed or variable.
B. Life insurance with an interest-only settlement
Incorrect. The scenario purchases an annuity rather than choosing a life-policy settlement.
C. Deferred annuity
Incorrect. Income begins next month, not after a deferred interval beyond the immediate classification.
D. Flexible-premium deferred annuity
Incorrect. It describes one premium and immediate income, not flexible-premium deferral.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.