Funding methods for annuities include which of the following?

• A. Single premium
• B. Flexible premiums
• C. Single premium and flexible premiums
• D. No premium payments allowed

Answer: (C)

Funding methods for annuities can be either a single lump sum or flexible ongoing payments. A single premium means you pay one lump sum up front, which is common for immediate annuities or for some fixed contracts. Flexible premiums allow payments to be made over time and can vary in amount, which is typical for many deferred annuities that accumulate funds gradually. Because annuities are designed to be funded in more than one way, specifying both options captures the reality that either method, or a combination of both, may be used. The idea that no premium payments are allowed isn’t correct, since funding is what builds the contract and ultimately supports future benefits.