South Carolina Life Insurance Practice Exam

Which statement is NOT true regarding installments for a fixed period annuity settlement option?

1. It is determined by the beneficiary's needs

2. The client takes full control over distributions

3. It provides payments for a specific number of years

4. It may vary based on market conditions

The correct answer is: The client takes full control over distributions

For a fixed period annuity settlement option, the distribution of payments is structured to provide regular payments over a predetermined duration, typically measured in years. This means that the amount, frequency, and duration of these payments are established at the time the annuity is set up, based on the total amount of the annuity and the chosen payout period. The statement that the client takes full control over distributions is not true because, with a fixed period annuity, the payment schedule is predetermined and structured by the annuity contract. Once this structure is established, the beneficiary typically does not have the flexibility to modify it according to their individual needs or preferences; the payments will occur as specified without alteration based on personal circumstances. This contrasts with other types of settlement options or investment vehicles where the distribution may be more flexible or controlled by the client. In addition, the flexibility of a fixed period annuity is limited compared to other forms of annuities or settlement options, where clients may have more options to adjust or take full control over their distributions based on their financial situation or market conditions. Thus, the correct answer highlights a common misconception regarding the level of control a beneficiary has in a fixed period annuity settlement option.