New Jersey Life Producer Practice Exam

What does a premium schedule in an annuity typically show?

1. Payment terms and frequency

2. Years of coverage

3. Potential investment returns

4. Beneficiaries listed

The correct answer is: Payment terms and frequency

A premium schedule in an annuity is fundamentally designed to illustrate the payment terms and frequency associated with the annuity contract. This schedule details how much money the policyholder is expected to pay, when those payments are due, and how often they need to be made, whether that be monthly, quarterly, annually, or as a lump sum. Understanding the payment terms is essential for the policyholder to manage their finances and ensure they are making timely contributions to their annuity. While the other choices may relate to aspects of an annuity, they do not specifically define the premium schedule. For instance, the years of coverage address how long the annuity will be in effect but do not indicate payment details. Potential investment returns pertain more to the performance of the annuity rather than the payment structure. Lastly, beneficiaries listed pertains to who will receive the benefits from the annuity upon the annuitant's death, which is unrelated to the actual payment schedule details. Thus, the focus on payment terms and frequency accurately represents the essence of a premium schedule in an annuity.