Annuities✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which party bears the investment risk in a fixed annuity?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In a fixed annuity, premiums go into the insurer's general account, which guarantees the principal and credits a minimum (and often current) interest rate. The insurer bears the investment risk. In a variable annuity, the owner directs funds into separate accounts and bears the market risk — the key distinction the exam tests.
Why the other options are wrong
- B) Subaccount selection and market risk belong to the owner in a VARIABLE annuity, not a fixed one.
- C) Beneficiaries are the recipients of unpaid benefits on death; they do not bear investment risk.
- D) Guaranty associations protect against insurer insolvency, not against investment performance.
Memory hook
Fixed = the insurer sweats the market. Variable = you do. The name tells you who holds the risk.