South Carolina Insurance Practice Exam

How soon can the benefit payments begin with a deferred annuity?

1. Immediately upon purchase

2. Within 6 months after the date of purchase

3. A minimum of 12 months after date of purchase

4. After the policyholder turns 65

The correct answer is: A minimum of 12 months after date of purchase

The benefit payments from a deferred annuity typically begin after a specified period following the purchase, which is often a minimum of 12 months. Deferred annuities are designed to accumulate interest over time, and their primary purpose is to provide income in retirement or at a later date rather than immediately. This allows the annuity to grow and compound, which can lead to larger payouts once distributions begin. The timeline for when payments can start is defined by the terms of the annuity contract. In many cases, this is set to be a minimum of 12 months after the purchase, aligning with the general nature of deferred products. The individual can choose to start receiving payments at a later date, usually determined by their own planning needs for retirement or other financial goals. The other potential options suggest either immediate access to benefits, which goes against the essence of a deferred product, or specific age-based timings that are not necessarily standard for all deferred annuities. Each annuity’s details can vary widely, but the minimum wait period is a common rule aligning with option C.