What occurs during the annuity phase of an annuity contract?

During the annuity phase of an annuity contract, the primary activity is the disbursement of payments to the annuitant. This phase is also known as the payout phase, where the insurer makes regular payments to the policyholder based on the terms of the contract. These payments can be for a specified period or for the lifetime of the annuitant, depending on the type of annuity that was selected. The annuity phase is designed to provide a steady stream of income, making it particularly beneficial for retirees or individuals seeking to convert their lump-sum savings into reliable cash flow.

In contrast, the phase in which premiums are paid occurs prior to this, known as the accumulation phase. Although some may consider the withdrawal of accumulated funds, this does not typically characterize the annuity phase; rather, it relates to the management of the accumulated value prior to disbursements. Additionally, while investing in stocks or bonds can happen during the accumulation phase, it does not take place during the annuity phase, which focuses on distribution rather than investment. Thus, the correct answer reflects the essential characteristic of the annuity phase, emphasizing its function as a means of providing regular income to the annuitant.