South Carolina Life Insurance Practice Exam

What type of annuity payments are often fixed and guaranteed regardless of market fluctuations?

1. Variable annuities

2. Indexed annuities

3. Fixed annuities

4. Deferred annuities

The correct answer is: Fixed annuities

The type of annuity payments that are often fixed and guaranteed regardless of market fluctuations is the fixed annuity. A fixed annuity provides a predetermined payout at regular intervals and secures a specific interest rate over a set period. This means that the annuitant knows exactly how much they will receive and when, creating a sense of financial stability and predictability. Unlike variable annuities, which can fluctuate in value based on investment performance and market conditions, fixed annuities are insulated from these fluctuations. This characteristic of fixed annuities makes them particularly appealing to individuals who prioritize steady income and risk aversion, especially during periods of economic uncertainty. Indexed annuities, while they can provide some growth potential linked to a stock market index, still involve elements of risk and do not guarantee a fixed payment. Deferred annuities concern the timing of when the payouts begin, which does not directly relate to the guarantee of fixed payments during the payout phase. Thus, the hallmark of fixed annuities is the guarantee of fixed payments, making them a reliable choice for individuals seeking stable income streams.