Life, Accident, and Health (LAH) Insurance Mastery Practice Exam

An immediate annuity is designed to start making payments to the annuitant almost immediately after the initial investment has been made. A single premium annuity is a type of immediate annuity where the investor makes a one-time upfront payment, or premium, to fund the annuity. After the purchase, the immediate annuity begins making regular income payments to the annuitant right away, which distinguishes it from a deferred annuity where the payments start at a later date.

This setup is particularly advantageous for individuals looking to secure a consistent income stream right after their retirement or when they need immediate cash flow. The nature of a single premium immediate annuity aligns directly with the needs of those seeking immediate financial support.

Other types of annuities, such as deferred annuities, variable annuities, and fixed annuities, do not fulfill the specific requirement for immediate payment upon purchase in the same way that a single premium immediate annuity does. Thus, the most appropriate description for the contract Liz purchased is that of a single premium annuity.