Texas Life Agent Practice Exam

What type of contracts require benefit payments at specified intervals?

1. Life insurance policies

2. Annuities

3. Term insurance

4. Whole life insurance

The correct answer is: Annuities

Annuities are designed specifically to provide benefit payments at specified intervals. These financial products are primarily used as a means of retirement income, allowing individuals to receive regular payments for a set period, which can be determined based on the terms of the annuity contract. This structured payout mechanism is a defining characteristic of annuities, distinguishing them from other types of contracts. In contrast, life insurance policies generally pay out a death benefit upon the death of the insured, rather than regular payments at intervals. Term insurance is a type of life insurance that provides coverage for a specific period but does not offer cash value or guarantee a payout unless there is a death during the term. Whole life insurance also provides a death benefit like term insurance but builds cash value over time, which can be accessed by the policyholder; however, it does not pay out benefits at regular intervals like annuities do.