Which of these is an element of a Single Premium annuity?

Which of these is an element of a Single Premium annuity?

• A. Lump-sum payment
• B. Monthly withdrawals
• C. Flexible premium options
• D. Comprehensive insurance coverage

Answer: (A)

A Single Premium annuity is characterized by the payment structure it employs. In this case, a lump-sum payment is the defining feature. When an individual purchases a Single Premium annuity, they make a single, one-time payment upfront, which then converts into a stream of income or investment value at a later time, depending on the type of annuity chosen. The nature of a Single Premium annuity means that it does not involve making multiple payments over time; rather, the initial lump-sum contribution is what establishes the annuity. This setup can be particularly advantageous for individuals who have a significant amount of capital available at once, allowing them to secure their future income needs effectively. Other options, such as monthly withdrawals, flexible premium options, and comprehensive insurance coverage, do not accurately represent the features of a Single Premium annuity. For instance, monthly withdrawals relate to the distribution phase of an annuity rather than the premium payment structure. Flexible premium options refer to annuities where the policyholder can make multiple, varying contributions over time, which is the opposite of a Single Premium structure. Comprehensive insurance coverage typically pertains to broader insurance policies rather than specifics of annuity payments.

A Single Premium annuity is characterized by the payment structure it employs. In this case, a lump-sum payment is the defining feature. When an individual purchases a Single Premium annuity, they make a single, one-time payment upfront, which then converts into a stream of income or investment value at a later time, depending on the type of annuity chosen.

The nature of a Single Premium annuity means that it does not involve making multiple payments over time; rather, the initial lump-sum contribution is what establishes the annuity. This setup can be particularly advantageous for individuals who have a significant amount of capital available at once, allowing them to secure their future income needs effectively.

Other options, such as monthly withdrawals, flexible premium options, and comprehensive insurance coverage, do not accurately represent the features of a Single Premium annuity. For instance, monthly withdrawals relate to the distribution phase of an annuity rather than the premium payment structure. Flexible premium options refer to annuities where the policyholder can make multiple, varying contributions over time, which is the opposite of a Single Premium structure. Comprehensive insurance coverage typically pertains to broader insurance policies rather than specifics of annuity payments.