Minnesota Life Insurance License Practice Exam

When does an immediate annuity begin payments after the policy has been in force?

1. Immediately upon purchase

2. After six months

3. After one year

4. After five years

The correct answer is: After one year

An immediate annuity is designed to provide its owner with regular income payments that begin shortly after the annuity is purchased. The correct answer states that payments begin immediately upon purchase, which reflects the fundamental characteristic of an immediate annuity. Typically, immediate annuities require that the first payment start within a year of the purchase. Therefore, while the answer indicated that payments begin after one year is incorrect, the essence of immediate annuities is that they are structured for individuals looking to receive payments soon after their investment. This helps in situations where individuals require income for retirement or other immediate financial needs. In contrast, the options suggesting delays of six months, one year, or five years do not align with the nature of immediate annuities, which are designed for immediate income rather than deferred payments. Immediate annuities thus stand out as products that cater to those needing prompt access to their benefit, stressing the importance of understanding the distinct features of this financial tool.