An individual using a lump-sum inheritance to create a lifetime income purchases what type of annuity?

A single premium immediate annuity is the correct choice in this context because it is specifically designed for individuals who want to turn a lump sum, such as a lump-sum inheritance, into an immediate and guaranteed stream of income for life. When someone purchases this type of annuity, they make a one-time payment (the single premium), and in return, the insurance company begins to pay them income immediately, often within a month.

This type of annuity is ideal for individuals looking for financial security during retirement, as it eliminates the risk of outliving their assets. The payments are generally structured to last for the individual's lifetime, providing peace of mind and financial stability. By converting their inheritance into a single premium immediate annuity, the individual ensures they receive a regular income without having to manage the investment themselves, thus aligning with their goal of creating a lifetime income from their lump-sum inheritance.