PSI Insurance Practice Exam

The type of annuity that links benefits to an underlying investment account to help offset inflation is the variable annuity. Variable annuities allow policyholders to allocate their premiums among various investment options, such as stocks and bonds, which can potentially grow over time.

This growth can help protect against inflation, as the value of the annuity can increase based on the performance of the chosen investments. Unlike fixed annuities, which provide a guaranteed payout that does not change regardless of inflation, variable annuities offer the potential for greater returns and a payout that can vary depending on market conditions.

By linking benefits to investment performance, variable annuities provide policyholders with an opportunity to earn higher returns that can help preserve their purchasing power in an inflationary environment. This feature makes them an attractive option for those looking to secure income in retirement while accounting for the potential impact of inflation.