Massachusetts Life Producer Practice Exam

Which type of annuity offers income payments for a specific time period after which benefits cease?

1. Life annuity

2. Fixed period annuity

3. Immediate annuity

4. Continuation annuity

The correct answer is: Fixed period annuity

The fixed period annuity is designed to provide regular income payments for a predetermined period, such as 10, 20, or 30 years. After this specified time frame, the payments cease, regardless of whether the annuitant is still alive. This structure is particularly appealing to individuals who want to ensure that they receive a consistent income stream during a set duration, allowing them to plan their finances with certainty for that period. Once the term of the annuity has ended, any remaining value does not go to the annuitant; hence, the benefits cease as outlined. This type of annuity contrasts with life annuities, which continue payments for the lifetime of the annuitant, and immediate annuities, which begin payments almost right away after the initial investment. Continuation annuities are not a standard category and may refer to features tied to other annuity types but do not encapsulate the structure of the fixed period annuity.