Difficulty: Easy

Average Score: 75%

The owner of a flexible premium annuity normally has opportunity to

Rationale

The owner of a flexible premium annuity normally has the opportunity to vary the amount and timing of the premium deposits.

Flexible premium annuities allow the owner to adjust both the amount and the timing of their contributions, providing greater financial flexibility tailored to their changing needs and circumstances throughout the investment period.

A (alter the settlement option after benefit payments begin) YOUR ANSWER

Once benefit payments from an annuity begin, the settlement option typically cannot be changed. The choices regarding how to receive payments are usually made at the onset of the annuity payout phase and are fixed thereafter, limiting any alteration to the established payment structure.

B (change the individual named as the primary annuitant) YOUR ANSWER

The primary annuitant is the individual whose life the annuity payments are based on and typically cannot be changed once the contract is in effect. This ensures that the terms of the annuity align with the life expectancy of the original annuitant, making it a permanent designation throughout the annuity's life.

C (vary the amount and timing of the premium deposits) CORRECT

Flexible premium annuities are specifically designed to allow owners to adjust their premium payments. This flexibility facilitates adapting to financial conditions, enabling the owner to increase, decrease, or even pause contributions as necessary, a key feature that distinguishes them from fixed premium annuities.

D (avoid surrender charges on all withdrawals of principal) YOUR ANSWER

Surrender charges are typically applied to withdrawals made within a specified period after the purchase of an annuity. While some annuities may allow limited penalty-free withdrawals, it is not accurate to state that all withdrawals of principal are exempt from surrender charges, as these fees are common in annuity contracts during the initial years.

Conclusion

Flexible premium annuities provide significant advantages by allowing owners to modify both the amount and timing of premium contributions. This feature facilitates financial adaptability, aligning the annuity with the owner's evolving financial situation. Other options, such as altering settlement choices or changing the primary annuitant, remain fixed once established, and surrender charges can still apply to early withdrawals, emphasizing the unique flexibility offered by this type of annuity.

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