Variable annuities fall into two broad categories, immediate and deferred annuities, depending upon when the annuity payout period begins. That is, each annuity is distinguished by how premiums are paid and when the benefits begin.
With an immediate annuity, the investor deposits a lump sum. Within 60 days, the insurance company will begin to pay the annuity benefits.
Types of deferred variable annuities include single-premium deferred and periodic-payment deferred.
- Single-Premium Deferred Annuities: When an investor deposits a single lump sum and the annuity benefits are deferred until a later date, the annuity is called a single-premium deferred annuity.
- Periodic-Payment Deferred Annuities: An annuity contract can allow an investor to make periodic payments on a scheduled basis, either monthly, quarterly or annually. The annuity pays out its benefits at a later date and is referred to as a periodic-payment deferred annuity.
Exam Tips and Tricks
You will need to know the types of variable annuities and what makes each one different. Remember there are two general types of annuities: immediate and deferred. From there, you can distinguish between the various types of each one.
Valuation of Variable Annuities
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