In a fixed annuity, the premiums are held in the insurer's:
Explanation
A fixed annuity places funds in the insurer's general account; the insurer bears the investment risk and guarantees both principal and a minimum interest rate, producing a predictable, stable value. A separate account tied to the market describes a variable annuity, where the owner bears the risk. The funds are not held in a mutual fund chosen by the owner or in the owner's bank account. The general-account guarantee is what makes a fixed annuity 'fixed.'
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Related questions on this topic
- In an annuity contract, the person whose life expectancy is used to determine the income payments is the:
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- A flexible-premium annuity is always a:
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