Florida Life and Health Insurance License Practice Test 2025 - Free Insurance Practice Questions and Study Guide

A variable annuity provides the advantage of potential for higher returns due to its investment options, which typically involve a variety of underlying securities such as stocks, bonds, and mutual funds. Unlike fixed annuities, which offer guaranteed returns at a set interest rate, the returns on a variable annuity fluctuate based on market performance. This allows policyholders the opportunity to benefit from market gains, thus offering the potential for increased accumulation of funds over time. As market conditions improve, the value of the investments within the annuity can grow more significantly than what a fixed annuity would provide, ultimately leading to higher payouts for the annuitant.

In contrast, while guaranteed income for life and lower fees can be attractive features, these are not intrinsic advantages of variable annuities compared to other products. Access to a predetermined investment strategy typically relates more to fixed-indexed annuities rather than the variable structure. It's the variability and associated investment risk that truly defines the potential for higher returns in variable annuities.