Final answer:
In a fixed benefit annuity, the insurer bears the investment risk and guarantees a specific periodic payment to the insured.
Step-by-step explanation:
In a fixed benefit annuity, the insurer bears the investment risk.
With a fixed benefit annuity, the insurer guarantees a specific periodic payment to the insured, regardless of the annuity's underlying investment performance. The insurer takes on the responsibility of managing the investment and ensuring that the promised benefits are delivered to the insured.
For example, if the annuity is set to pay $1,000 per month, the insurer will continue to make those payments even if the annuity's investments generate lower returns than expected.