Tennessee Insurance Practice Exam

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Study for the Tennessee Insurance Exam. Prepare with a database of questions and flashcards, each offering hints and detailed explanations. Ace your exam confidently!

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An immediate annuity consists of what type of premium?

Regular premium
Single premium
Flexible premium
Variable premium

The correct answer is: Single premium

An immediate annuity is designed to start making payments to the annuitant almost right after the purchase. This type of annuity generally requires a single lump sum payment made upfront, which helps to fund the annuity. By using a single premium, the annuitant effectively purchases the right to receive periodic payments immediately or shortly after the purchase date. In contrast, regular premiums involve ongoing contributions over time, which are not characteristic of immediate annuities. Flexible premiums allow for varied payment amounts and schedules, which would also not align with the fixed, lump sum nature of an immediate annuity. Variable premiums are tied to investment choices and changes in the market value, making them unsuitable for an immediate annuity that guarantees predictable payments from the start. Thus, the single premium option aligns perfectly with the structure and purpose of an immediate annuity.