Which statement accurately describes immediate annuities?

Immediate annuities are designed to start making payments to the annuitant almost immediately after a premium is paid. Specifically, the first payment typically occurs at the end of the first payment period, which is usually defined as monthly, quarterly, semi-annually, or annually based on the terms of the contract. This characteristic distinguishes immediate annuities from other annuity types, such as deferred annuities, which require a waiting period before payments begin.

The timing of the first payment is a critical aspect of immediate annuities, making this statement accurate in its description. It reflects the nature of these financial products, highlighting their purpose of providing quick income to the annuitant.

For clarity, immediate annuities are different from products that begin payments in the future or involve an accumulation phase; those statements do not describe immediate annuities accurately. Also, taxation generally applies to annuity payments, making the notion that immediate annuities are not subject to any taxation an inaccurate statement in this context.