Life License Qualification Program (LLQP) Practice Exam

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Which type of annuity starts providing income payments usually within 30 days from the purchase date?

Flexible Premium Deferred annuity
Variable annuity
Immediate annuity
Straight Life annuity

The correct answer is: Immediate annuity

An immediate annuity is designed to start providing income payments shortly after the purchase date, typically within 30 days. This type of annuity is purchased with a lump-sum payment and is particularly appealing for individuals who are looking for guaranteed income soon after their investment. The immediate annuity contrasts with other forms of annuities, such as deferred annuities, which provide payments at a later date. For example, a flexible premium deferred annuity can accumulate value over time before making any payouts, delaying benefits to the policyholder. Similarly, variable annuities may also have a deferred payout structure tied to investment performance. While a straight life annuity can be a form of immediate annuity if purchased to provide income for the lifetime of the annuitant, it is just one variant of the broader category of immediate annuities. Therefore, "immediate annuity" is the most accurate term to describe the product that starts making payouts shortly after it is purchased.