South Carolina Life Insurance Practice Exam

Which statement is false regarding installments for a fixed amount?

1. Payments remain consistent throughout the term

2. They provide flexibility in payment structure

3. Payments will stop when the annuitant dies

4. They assume a fixed contractual obligation

The correct answer is: They provide flexibility in payment structure

The assertion that payments provide flexibility in payment structure is not accurate when discussing installments for a fixed amount. Installments for a fixed amount typically have set payment amounts that do not fluctuate, offering consistency and predictability in the payment schedule. This structure is designed for straightforward budgeting and planning, as each payment is the same until the total amount is exhausted. Therefore, the nature of fixed installments does not allow for the adaptability or modification of the payment amount based on the financial circumstances of the annuitant or any other variable. In contrast, the other statements accurately describe the characteristics of fixed amount installments. Payments do indeed remain consistent, they do cease upon the death of the annuitant, and they reflect a predetermined contractual obligation, ensuring that both the insurer and the annuitant understand the terms of the agreement.