Which statement best describes an immediate annuity?

Which statement best describes an immediate annuity?

• A. It has an accumulation period
• B. It begins paying immediately within a year of issue date
• C. It requires funding in a lump sum at maturity
• D. It only pays after a deferred period

Answer: (B)

Immediate annuities are designed so that the payout starts almost right away after you fund the contract. After you pay a single premium (or make a lump-sum funding), you begin receiving payments immediately—typically within the first payment period after the issue date. This timing is what distinguishes it from other annuity types that built in an accumulation phase or deferment before any payments begin. So describing an immediate annuity as beginning payments immediately within a year of issue best captures its defining feature.

Immediate annuities are designed so that the payout starts almost right away after you fund the contract. After you pay a single premium (or make a lump-sum funding), you begin receiving payments immediately—typically within the first payment period after the issue date. This timing is what distinguishes it from other annuity types that built in an accumulation phase or deferment before any payments begin. So describing an immediate annuity as beginning payments immediately within a year of issue best captures its defining feature.