Louisiana Life and Health Practice Test 2025 - Free Life and Health Exam Practice Questions and Study Guide

An immediate annuity is designed to provide payments that start right away, typically within one year of the initial investment. This type of annuity guarantees that payments will continue for a specified period or until the death of the annuitant, thereby offering a reliable income stream either for a set duration or for the annuitant's lifetime. The immediate nature of this product makes it particularly appealing for individuals seeking instant cash flow, such as retirees needing income right after they stop working.

In contrast, a deferred annuity would not start paying out immediately; it accumulates funds over time before disbursing payments in the future. Fixed and variable annuities specify the investment approach differently, with fixed annuities providing a stable interest rate and variable annuities allowing for investment in various assets, which then affect returns. However, neither of these terms defines the immediate initiation of payment that characterizes the immediate annuity.