Tennessee Life Producer Practice Exam

Which of the following is a key characteristic of Flexible Installment Deferred annuities?

1. Guaranteed minimum interest rate

2. Fixed payments over a set period

3. Variable payments based on market performance

4. Payments that can vary after initial investment

The correct answer is: Payments that can vary after initial investment

Flexible Installment Deferred annuities are designed to allow for flexibility in how and when payments are made, as well as in the amount of the payments. The key characteristic of this type of annuity is that payments can vary after the initial investment, accommodating changes in the annuitant's financial situation or preferences over time. This flexibility can appeal to individuals who may want to adjust their investment contributions based on their current financial circumstances or goals. In contrast, a guaranteed minimum interest rate typically refers to the security and predictability of returns, but does not highlight the flexible nature of payment structures. Fixed payments over a set period establish a predictable payment schedule, which does not align with the flexibility characteristic of these annuities. Variable payments based on market performance suggest that payments change with market conditions rather than being directly influenced by the investor's choices or flexibility after the initial investment. Thus, the nature of Flexible Installment Deferred annuities revolves around the ability to modify future payments, making the option of varying payments after the initial investment the defining feature.