South Carolina Life and Health Practice Exam

What is the period called when the accumulated value in an annuity is paid out?

1. Accumulation phase

2. Annuitization phase

3. Distribution phase

4. Investment phase

The correct answer is: Annuitization phase

The period when the accumulated value in an annuity is paid out is known as the annuitization phase. This phase follows the accumulation phase, where the investment grows and contributions are made to the annuity. During the annuitization phase, the insurer converts the accumulated value into a series of periodic payments to the annuitant. These payments can be structured in various ways, such as for a specified period or for the lifetime of the annuitant, depending on the terms of the annuity contract. This phase is crucial because it represents the moment when the annuity serves its primary purpose—providing income during retirement or another designated period. Understanding this phase helps individuals make informed decisions about their long-term financial strategies and how to utilize annuities effectively for their income needs in the future.