PSI Ohio Insurance Practice Exam 2025 - Free Ohio Insurance Practice Questions and Study Guide.

A variable annuity is designed to provide benefits that are linked to the performance of underlying investment options, such as stocks and bonds. This connection to investments allows for the potential for growth that can keep pace with, or even outstrip, inflation over time. Because the value of the annuity can fluctuate based on market performance, it offers the opportunity for increased returns that fixed payments from a fixed annuity would not provide.

In contrast, a fixed annuity guarantees a specified payout amount, which does not adjust with inflation, and an immediate annuity begins payments right away based on a predetermined amount as well, with similar characteristics. An interest-sensitive annuity may have some variability based on interest rates but doesn't directly link to market investments in the same manner as a variable annuity. Thus, the variable annuity stands out as the option that can provide a hedge against inflation through investment-linked benefits.