Pennsylvania Life and Health Insurance Exam Practice Question
What type of annuity is purchased with a lump sum and begins making payments within one year?
Correct Answer: B
Rationale: A Single Premium Immediate Annuity (SPIA) is purchased with a lump sum and starts making payments within one year, making it the ideal choice for immediate income.
Option A, a Flexible Premium Deferred Annuity, allows for multiple contributions over time and delays payments, which does not fit the criteria.
Option C, a Deferred Annuity, also postpones payments to a future date, typically beyond one year.
Option D, an Installment Refund Annuity, provides a refund of the purchase price if the annuitant passes away early but does not specify immediate payments, thus not aligning with the question's requirements.
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