Which statement best describes a deferred annuity?

Which statement best describes a deferred annuity?

• A. Pays benefits starting immediately after purchase.
• B. Pays benefits starting after a deferral period greater than one year.
• C. Provides only death benefit.
• D. Is a term life policy.

Answer: (B)

A deferred annuity is defined by a delay between funding the contract and when payments begin. The key idea is that the money you contribute has time to accumulate, and then distribution starts at a future date you choose. Saying benefits start after a deferral period captures that delay, typically longer than a year, which distinguishes it from an immediate annuity that pays right away after purchase. The other descriptions point to different products: one describes an immediate annuity, another describes a death benefit in a life insurance context, and the last describes a term life policy.

A deferred annuity is defined by a delay between funding the contract and when payments begin. The key idea is that the money you contribute has time to accumulate, and then distribution starts at a future date you choose. Saying benefits start after a deferral period captures that delay, typically longer than a year, which distinguishes it from an immediate annuity that pays right away after purchase. The other descriptions point to different products: one describes an immediate annuity, another describes a death benefit in a life insurance context, and the last describes a term life policy.