South Carolina Life Insurance Practice Exam

How long can income payments begin in an immediate annuity?

1. Immediately

2. No later than a month

3. No later than a year

4. After one fiscal year

The correct answer is: No later than a year

Immediate annuities are specifically designed to start making income payments right after a lump sum investment is made. Typically, these payments can commence almost immediately, often within one month of purchase. However, the correct choice refers to the broader guideline that they must begin no later than one year after the annuity is bought. This means that while many immediate annuities will indeed start payments sooner than that—often within the first month—there's a regulatory or industry standard that stipulates payments cannot exceed a one-year delay from the point of purchase. This flexibility allows for consumers to select an immediate payout schedule that fits their financial needs while ensuring that there is a defined time frame for when they will start receiving their benefits. Understanding this characteristic of immediate annuities is important for proper financial planning and to set clear expectations about when one can start receiving income from their investment.