What is annuitization in relation to annuities?

Annuitization refers specifically to the phase in which the funds accumulated within an annuity contract are converted into a stream of income payments. This process typically occurs after the accumulation phase when the annuitant decides to start receiving the benefits from the annuity. During annuitization, the insurance company calculates the periodic payments based on several factors, including the total amount accumulated, the expected duration of payouts, and the annuitant's life expectancy. This transformation allows individuals to receive regular income, which is especially beneficial during retirement.

In contrast, the other options pertain to different aspects of annuities. Accumulating funds is relevant to the initial phase before the annuitization process begins, and determining premium payments and disbursing lump sum payments relate to other operational aspects of managing an annuity rather than the conversion of funds into income.