California Insurance License Exam Practice Test Practice Question
Which annuity contracts are backed by a life insurer's separate account?
Correct Answer: B
Rationale: Variable annuities are backed by a life insurer's separate account, allowing policyholders to invest in various sub-accounts, such as stocks and bonds, which can fluctuate in value. This structure provides the potential for higher returns, but also carries investment risk.
Fixed annuities (A) are backed by the insurer’s general account, providing guaranteed returns without exposure to market fluctuations. Equity-indexed annuities (C) combine elements of fixed and variable annuities, but they also rely on the insurer’s general account for their guarantees. Market-value adjusted annuities (D) offer interest adjustments based on market conditions but do not utilize a separate account structure.
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