South Carolina Life and Health Practice Exam

With a deferred annuity, how soon can benefit payments begin?

1. Immediately after purchase

2. A minimum of 12 months after date of purchase

3. Within 3 months of purchase

4. At the customer's request at any time

The correct answer is: A minimum of 12 months after date of purchase

In the context of a deferred annuity, benefit payments are designed to begin after a set accumulation period, which allows the annuity to grow on a tax-deferred basis before the payout phase starts. The minimum wait time for benefit payments to commence is typically at least one year after the purchase. This period allows for investment growth and can vary by the terms of the specific annuity contract. Therefore, the statement that benefit payments can start a minimum of 12 months after the date of purchase is accurate. This ensures that the annuity remains a long-term investment, which is essential for fulfilling its purpose of providing income in retirement or another designated time frame. Other options may suggest immediate access to funds or more flexible timelines for starting benefit payments, which may not align with standard practices for typical deferred annuities. Understanding the foundational structure of deferred annuities and their intended use is crucial for recognizing why the correct timeframe for starting benefits aligns with a minimum of 12 months.