An annuity provides which type of insurance for the investor?

An annuity provides which type of insurance for the investor?

• A. Longevity
• B. Mortality
• C. Life
• D. Serious illness.

Answer: (A)

Annuities are designed to provide a steady income in retirement to protect against the risk of living longer than your savings will support. This protection against outliving your resources is longevity risk, so annuities are described as longevity insurance. By turning a lump sum into guaranteed payments for life, the investor gains a predictable income stream that lasts as long as they live. Other concepts—mortality or life insurance—relate to protection if someone dies or passes away, and serious illness cover protects health shocks; those are different goals and aren’t the primary purpose of a standard annuity. Some products may add riders, but the core idea of an annuity is to insure against running out of funds due to longevity.

Annuities are designed to provide a steady income in retirement to protect against the risk of living longer than your savings will support. This protection against outliving your resources is longevity risk, so annuities are described as longevity insurance. By turning a lump sum into guaranteed payments for life, the investor gains a predictable income stream that lasts as long as they live. Other concepts—mortality or life insurance—relate to protection if someone dies or passes away, and serious illness cover protects health shocks; those are different goals and aren’t the primary purpose of a standard annuity. Some products may add riders, but the core idea of an annuity is to insure against running out of funds due to longevity.