Minnesota Life Insurance License Practice Exam

How soon can an annuitant start receiving payments from an immediate annuity funded with a single premium?

1. 1 week

2. 1 month

3. 3 months

4. 6 months

The correct answer is: 1 month

An annuitant can start receiving payments from an immediate annuity funded with a single premium as soon as one month after the purchase of the annuity. This type of annuity is designed to begin distributions promptly, distinguishing it from deferred annuities, which require a waiting period before payments commence. In the context of immediate annuities, the key characteristic is the immediacy of income. Once a single premium is paid, the insurance company sets a payment schedule that typically starts within a month, allowing the annuitant to access their benefits quickly. This is particularly beneficial for individuals who require immediate income, such as those in retirement. Understanding the timelines associated with annuities is crucial, as it can impact financial planning. The answer reflects the standard industry practice for immediate annuities, aligning with regulations governing the issuance of such contracts.