West Virginia State Life Insurance Practice Exam

An individual purchases an annuity by making payments of no less than $100 quarterly. What type of annuity is this?

1. Immediate annuity

2. Flexible installment deferred

3. Single premium annuity

4. Life annuity

The correct answer is: Flexible installment deferred

The correct option is a flexible installment deferred annuity because it allows the individual to make ongoing payments (in this case, at least $100 quarterly) over time rather than a single lump sum. This type of annuity is designed to accumulate funds over a period of time, which will then provide income payments at a later date, typically during retirement. Flexible installment deferred annuities are particularly appealing for individuals who want the flexibility to make contributions that fit their financial situation. The payments can vary in amount, though a minimum amount is often required, which aligns perfectly with the condition of making quarterly payments of no less than $100. An immediate annuity, on the other hand, usually requires a single lump-sum payment and begins making payments to the annuitant almost immediately. A single premium annuity is similar, where the annuity is purchased with one single payment rather than multiple installments. A life annuity provides income based on the lifetime of the annuitant, but it does not inherently refer to the structure of payments. Thus, these other types do not fit the description of making regular quarterly payments.