Which of the following annuities generally pays benefits based on units rather than specific dollar amounts?

Rationale

Variable annuity

Variable annuities typically pay benefits based on units, which represent shares in various investment funds within the annuity contract. The value of these units fluctuates based on the performance of the underlying investments.

A (A Flexible annuity) YOUR ANSWER

Flexible annuities offer the policyholder the ability to adjust premium payments and sometimes the timing and amount of benefit payouts. However, the benefits are generally not paid based on units but rather on a predetermined formula or fixed payments.

C (A Deferred annuity) YOUR ANSWER

Deferred annuities involve a waiting period before the annuitant starts receiving payments. These payments are often fixed or based on a predetermined formula rather than units tied to investment performance.

D (A Single Premium annuity) YOUR ANSWER

Single Premium annuities are purchased with a one-time lump sum payment. The benefits from these annuities are typically fixed or calculated based on a predetermined formula, not on units as seen in variable annuities.

Conclusion

Variable annuities stand out among the options as they pay benefits based on units tied to the performance of underlying investments. This structure introduces an element of risk and potential reward based on market fluctuations, distinguishing variable annuities from other types that offer fixed or predetermined benefit amounts.

Which of the following annuities generally pays benefits based on units rather than specific dollar amounts?

Variable annuity

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