State RegulationsMA specificDifficulty 3/5
Which statement correctly distinguishes a fixed deferred annuity from a variable annuity sold in Massachusetts?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
The account structure determines who bears investment risk. Under Massachusetts law, a fixed deferred annuity invests in the insurer's general account, where the insurer guarantees credited rates and absorbs investment results. A variable annuity — M.G.L. c. 175, § 132F et seq. — invests in a separate account, so its values fluctuate with performance and the owner carries the investment risk. Reversing the accounts or claiming a state guarantee are the two classic confusions this distinction resolves.
Why the other options are wrong
- A) The fixed product lives in the general account; only the variable annuity uses the separate account under M.G.L. c. 175, § 132F et seq.
- C) The accounts are reversed in this option; fixed annuities use the general account and variable annuities use the separate account.
- D) The state guarantees neither product's market performance; variable annuity owners expressly bear investment risk.
Memory hook
Fixed = general account, insurer's risk; variable = separate account, your risk.