West Virginia State Life Insurance Practice Exam

What type of product is most suitable for a retired individual looking to invest a lump-sum of money?

1. Life Insurance

2. Health Insurance

3. Annuity

4. Term Insurance

The correct answer is: Annuity

An annuity is particularly suitable for a retired individual looking to invest a lump-sum of money because it provides a steady stream of income for a specified period, often for the remainder of the retiree's life. This aligns well with the needs of retirees who may be seeking financial security during retirement by ensuring they have regular income to cover living expenses, healthcare, and other costs. Additionally, annuities can offer various options such as fixed, variable, or indexed annuities, allowing retirees to choose the type of investment that best fits their risk tolerance and financial goals. They can also include features such as death benefits or options for beneficiaries, making them more flexible compared to other investment vehicles. In contrast, life insurance primarily serves to provide a death benefit to beneficiaries rather than serve as an income source during a retiree's lifetime. Health insurance focuses on covering medical expenses rather than providing an avenue for income. Lastly, term insurance is a temporary coverage plan that does not build cash value or provide payouts until death occurs, making it less suitable for investment purposes specifically aimed at generating income post-retirement.