Tennessee Life Producer Practice Exam

What is a notable feature of an annuity contract regarding payouts?

1. Immediate payout upon signing

2. Regular income payments in the future

3. One-time lump-sum payments only

4. No payouts before a specified age

The correct answer is: Regular income payments in the future

An annuity contract is specifically designed to provide a series of regular income payments over a set period, which can extend over the lifetime of the annuitant or for a predetermined period. This feature is particularly beneficial for individuals seeking a steady income stream during retirement or other phases of life. The regular income payments can begin at a future date after the investment phase, allowing individuals to accumulate funds before they start withdrawing for income. In most cases, this deferred income structure makes annuities appealing for long-term financial planning. Immediate payouts are associated with a specific type of annuity called an immediate annuity, which requires the annuitant to fund the annuity in a certain way. However, many annuities focus on providing future income through a payout phase. Options indicating one-time lump-sum payments or restrictions on payouts before a specific age do not align with the standard structure and purpose of most annuities; they focus instead on continued regular distributions after an initial accumulation stage.