Maryland Life and Health Insurance License Practice Exam

Fixed period settlement options are considered to be a form of what financial product?

1. Annuity

2. Insurance policy

3. Mutual fund

4. Retirement plan

The correct answer is: Annuity

Fixed period settlement options are indeed a form of an annuity. An annuity is a financial product that provides a series of payments made at regular intervals. In the case of fixed period settlement options, the insurer agrees to make payments to the beneficiary or the policyholder over a specified period, providing predictable income over a defined timeframe. This contrasts with other options mentioned. An insurance policy primarily offers protection against financial loss rather than providing systematic payouts over time. While mutual funds involve the pooling of investor money to purchase securities and can offer returns based on market performance, they do not guarantee fixed payouts. Similarly, a retirement plan encompasses a broader range of financial products and strategies aimed at accumulating funds for retirement but does not specifically refer to the type of structured income provided by fixed period settlements. Thus, the correct classification of fixed period settlement options as an annuity reflects their nature of providing systematic, guaranteed payments, distinguishing them from other financial products.