California Insurance License Exam Practice Test Practice Question
Which contract provides for the systematic liquidation of a fund?
Correct Answer: A
Rationale: An annuity systematically liquidates a fund by providing regular payments over time, typically until the annuitant's death or the end of a specified term. This structured payout allows for the gradual use of the invested capital.
In contrast, life insurance (B) is designed to provide a death benefit, not to liquidate a fund systematically. Mortgage redemption (C) refers to paying off a loan, rather than liquidating a fund. Disability insurance (D) offers income replacement during periods of disability but does not involve fund liquidation. Thus, only an annuity fulfills the requirement for systematic liquidation.
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