South Carolina Life Insurance Practice Exam

An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity?

1. Immediate annuity

2. Deferred annuity

3. Variable annuity

4. Pure life annuity

The correct answer is: Deferred annuity

The correct designation for an annuity purchased with multiple payments that starts income payments after one year from the moment of purchase is a deferred annuity. This type of annuity allows the investor to accumulate funds over time during the accumulation phase and then provides income payments at a later date, specifically after a predetermined period which, in this case, is one year. The defining characteristic of a deferred annuity is that the income payments do not begin immediately upon the investment; they are postponed, allowing the invested funds to potentially grow. This structure is particularly appealing for individuals looking to save for retirement or a future financial goal, as it provides the opportunity to build value before starting to withdraw funds. An immediate annuity, by contrast, starts making payments right away, typically within one year of purchase, which clearly sets it apart from a deferred annuity. A variable annuity involves investment options that can fluctuate based on market performance and does not specify a payment structure based solely on a simple timeline of years. A pure life annuity is designed to provide income for the lifetime of the annuitant, without any cash value or residual payout, and without reference to any specific payment schedule related to multiple payments.