Which annuity pays monthly amounts that rise or fall based on the performance of investments in a segregated fund?

Which annuity pays monthly amounts that rise or fall based on the performance of investments in a segregated fund?

• A. Indexed Annuity Payments
• B. Variable Annuity
• C. Impaired Life Annuity
• D. Split Annuity Strategy

Answer: (B)

The main idea here is that payments are tied to how the underlying investments perform. A variable annuity uses investment subaccounts inside the contract, and the value of those subaccounts fluctuates with market returns. Because the payout is based on the fund value, the monthly payments can rise when the investments perform well and fall when they don’t. This aligns with having a monthly amount that moves up and down with the performance of the segregated fund’s investments. Other options don’t fit this mechanism. An indexed annuity’s payments are linked to a market index with caps or floors, not directly to the fund’s actual performance. An impaired life annuity is oriented around the insured’s life expectancy and typically involves a fixed or guaranteed payment schedule rather than market-based variation. A split annuity strategy refers to a planning approach rather than a type of annuity whose payments depend on investment performance.

The main idea here is that payments are tied to how the underlying investments perform. A variable annuity uses investment subaccounts inside the contract, and the value of those subaccounts fluctuates with market returns. Because the payout is based on the fund value, the monthly payments can rise when the investments perform well and fall when they don’t. This aligns with having a monthly amount that moves up and down with the performance of the segregated fund’s investments.

Other options don’t fit this mechanism. An indexed annuity’s payments are linked to a market index with caps or floors, not directly to the fund’s actual performance. An impaired life annuity is oriented around the insured’s life expectancy and typically involves a fixed or guaranteed payment schedule rather than market-based variation. A split annuity strategy refers to a planning approach rather than a type of annuity whose payments depend on investment performance.