Which statement best describes a combination annuity?

Which statement best describes a combination annuity?

• A. It is solely a fixed contract with a guaranteed rate
• B. It combines features of fixed and variable contracts, with the fixed portion in the general account and the variable portion in a separate account
• C. It has no insurance component and is not licensed
• D. It does not use a separate account

Answer: (B)

A combination annuity blends fixed and variable elements. The fixed portion is backed by the insurer’s general account, providing guarantees such as a minimum rate or income. The variable portion is placed in a separate account, where investment performance drives returns and involves market risk. This structure lets you get some guaranteed income or growth security from the fixed part while still pursuing potential growth from the variable part. So it fits best with the description that combines fixed and variable features, with the fixed portion in the general account and the variable portion in a separate account. The other descriptions don’t fit because a solely fixed contract wouldn’t include a separate account for the variable portion; an annuity is an insurance product and licensed accordingly; and a combination annuity does use a separate account for the variable portion.

A combination annuity blends fixed and variable elements. The fixed portion is backed by the insurer’s general account, providing guarantees such as a minimum rate or income. The variable portion is placed in a separate account, where investment performance drives returns and involves market risk. This structure lets you get some guaranteed income or growth security from the fixed part while still pursuing potential growth from the variable part.

So it fits best with the description that combines fixed and variable features, with the fixed portion in the general account and the variable portion in a separate account. The other descriptions don’t fit because a solely fixed contract wouldn’t include a separate account for the variable portion; an annuity is an insurance product and licensed accordingly; and a combination annuity does use a separate account for the variable portion.