New Jersey Life Insurance Practice Exam

A Fixed Annuity provides policyholders with fixed payments over time and ensures a guaranteed minimum interest rate on the funds invested. This type of annuity allows individuals to contribute a certain amount of money and, in return, receive a predictable income stream during the payout phase, typically at retirement. The guarantee of a minimum interest rate means that the annuity's value will not fall below a certain level, providing stability and security for the investor.

In contrast, other types of annuities, such as deferred annuities, can vary in their structure (e.g., being fixed or variable) and do not inherently guarantee fixed payments or minimum interest rates. Variable Annuities allow for investments in different accounts, which can lead to fluctuating payments based on market performance rather than fixed amounts. Indexed Annuities, while they may offer some level of interest rate guarantees tied to a specific index, typically do not guarantee fixed payments in the same way that Fixed Annuities do.

Therefore, a Fixed Annuity is distinct in its provision of security through fixed payments and guaranteed interest, making it the correct choice.

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