What is the PRIMARY purpose of an annuity?

An annuity is designed to provide a steady income stream, primarily to protect against the risk of outliving one's assets (longevity risk).

What are the two phases of an annuity contract?

The accumulation phase (pay-in period where money grows) and the annuitization phase (payout period where the insurer makes periodic payments to the annuitant).

What is the difference between the annuity owner and the annuitant?

The owner controls the contract and pays premiums, while the annuitant is the person whose life expectancy determines the payout. These can be the same person or different people.

What is a 'pure life' (straight life) annuity payout option?

A pure life annuity pays income only for as long as the annuitant lives, with no further payments upon death—even if the annuitant dies shortly after annuitization.

How does a fixed annuity differ from a variable annuity?

A fixed annuity credits a guaranteed minimum interest rate with no investment risk to the owner, while a variable annuity's value fluctuates based on the performance of separate account sub-accounts chosen by the owner.

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Annuities & Retirement – Life & Health Insurance License Exam

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