Practice Quiz

Health and Life Insurance

Category - Tax Issues

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A __________ is an official contract between an individual and an insurance company for a guaranteed interest bearing policy that provides tax-deferred earnings and includes optional guaranteed income choices.
  1. Fixed annuity
  2. Variable annuity
  3. Index annuity
  4. Equity index annuity
Explanation
Answer: A - A fixed annuity is an official contract between an individual and an insurance company for a guaranteed interest bearing policy that includes optional guaranteed income choices. Fixed annuities are also referred to as tax-deferred fixed annuities. The insurance company will credit interest on a fixed annuity, but the annuity holder does not have to pay taxes on the earnings until the time that they begin making withdrawals or begin to receive an income from the fixed annuity.
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