What happens when a contract is annuitized?

When a contract is annuitized, it typically involves the conversion of a lump-sum payment or accumulated funds into a series of periodic payments. This process is guided by the terms of the annuity contract, where the insurance company takes on the obligation to make these payments to the annuitant, thus assuming responsibility for managing those funds.

Choosing to annuitize means that the ownership and control of the accumulated funds shift from the annuitant to the insurer, which allows them to guarantee the periodic payments. At this stage, the annuitant receives regular income, often for a specified period, such as for their lifetime or for a fixed number of years.

This situation clarifies why the chosen answer is correct, as it describes the fundamental aspect of an annuitized contract: the insurer assumes control of the funds to provide the agreed-upon financial benefits to the annuitant.

Regarding the other options, a policy is not converted into a term policy through annuitization, rather it transitions into a different type of financial arrangement. The annuitant retains some degree of control until they decide to annuitize. Upon annuitization, the focus is more on income provision rather than access to the lump-sum, but that does