A Single Premium Annuity is characterized by first payments timing as?

• A. First payment after 5 years
• B. First payment only after death
• C. First payment immediately upon purchase
• D. First payment as early as 1 month from the date of purchase

Answer: (D)

A single premium annuity is funded with one lump sum and is designed to convert that premium into a stream of payments. The timing of the first payment depends on whether the annuity is immediate or deferred, with immediate payouts starting soon after purchase. Since the premium is paid up front, the contract can begin distributing income relatively quickly, often at the end of the first payout period. That’s why the first payment can be as early as one month from the purchase date in a single premium immediate annuity.

Waiting five years would be a long deferral, which is not characteristic of the immediate payout option. The idea of the first payment occurring only after death contradicts the purpose of an annuity, which is to provide income to the annuitant during life. Beginning exactly at the purchase date is not typical because payments usually start after the first payout period.