New York Child Abuse Identification and Reporting Practice Exam

Which statement about a flexible premium annuity is true?

1. The amount of each premium payment is fixed

2. The purchaser can only pay annually

3. The purchaser has the option to vary premium amounts

4. The policy will expire after a set term

The correct answer is: The purchaser has the option to vary premium amounts

A flexible premium annuity is designed to allow the purchaser greater flexibility in their payment options. This means that instead of having fixed premium payments, individuals have the freedom to vary the amounts they pay into the annuity. This feature makes it especially appealing to those whose financial situations may fluctuate over time or who prefer to make irregular payments rather than sticking to a strict schedule. The correct statement emphasizes that purchasers can adjust their contributions based on their financial circumstances, leading to a more adaptable savings strategy. This flexibility can assist individuals in managing their investments according to their needs and goals, allowing for a more personalized approach to retirement planning. In contrast, fixed premium payments, restricted payment frequencies, and set term expirations are characteristics typically associated with different types of financial products, such as fixed premium annuities or certain term insurance policies, rather than the flexible premium variety. Thus, the ability to vary premium amounts is a defining feature of flexible premium annuities.