Utah Life Producer Practice Exam

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Which of the following is NOT true regarding the accumulation period of an annuity?

It is a period of growth for the investment
It cannot occur in a deferred annuity
It is the time before annuity payouts begin
It allows the annuity to accumulate value

The correct answer is: It cannot occur in a deferred annuity

The accumulation period of an annuity is the phase during which the investment grows and builds value before any withdrawals or payouts commence. This phase is important as it allows for the growth of the principal through various interest mechanisms. The statement that it cannot occur in a deferred annuity is not true. Deferred annuities are specifically designed with an accumulation period, during which the investment grows until the policyholder decides to annuitize the contract or withdraw funds. During this accumulation phase, funds may appreciate based on the performance of underlying investments, making it a crucial aspect of deferred annuities. The other options provided accurately describe the accumulation period: it is indeed a period of growth for the investment, it is the time before payouts occur, and it allows for the annuity to accumulate value. Therefore, the choice stating that the accumulation period cannot occur in a deferred annuity is incorrect, reinforcing that this phase is essential for these types of annuities.