Question

A lump sum of money is placed into an account from which the annuitant will draw periodic benefits beginning more than a year from the date of purchase. This describes a:

Answer 1

Answer: Single premium deferred annuity

Explanation: Single premium deferred annuity requires only a single or one-time premium payment which is usually a huge sum. This is different from multiple premium deferred which requires further payment after initial premium. The annuity is allowed to grow over a certain period usually more than one year from the date of annuity purchase before being paid regular Periodic income.