Connecticut Life Producer Practice exam

When can payments begin in a deferred annuity?

1. Immediately upon purchase

2. Within six months of purchase

3. Sometime after one year from the date of purchase

4. Only after the policy matures

The correct answer is: Sometime after one year from the date of purchase

In a deferred annuity, payments begin at a specified future date rather than immediately after purchase. This characteristic is fundamental to the function of deferred annuities, as they are designed for individuals who wish to accumulate savings or investment over time before receiving regular income distributions. Payments typically commence after a predetermined accumulation phase, which can vary widely depending on the terms of the annuity contract. Often, this phase lasts for several years, and the question implies that the start of payments is set to occur at least one year post-purchase, aligning with the timeframes commonly seen in many deferred annuities. Other choices, such as beginning payments immediately upon purchase or within six months, would describe immediate annuities or certain other products where income starts without the delay inherent in deferred annuities. Also, starting payments only after the policy matures is generally not accurate, as maturity refers to the completion of the annuity contract's term or the end of the accumulation phase, which could extend much longer than a year depending on the terms agreed upon.