Which type of annuity allows for investment in various sub-accounts similar to mutual funds?

The type of annuity that allows for investment in various sub-accounts similar to mutual funds is the variable annuity. This product is designed to offer policyholders the flexibility to allocate their premium payments among a wide range of investment options, often referred to as sub-accounts. Each sub-account is typically invested in a specific type of asset, such as stocks, bonds, or money market instruments, and the performance of the annuity is directly tied to the performance of the selected investments.

Because variable annuities are linked to market performance, they can provide opportunities for growth and may appeal to those who are comfortable with the associated investment risks. The potential for higher returns is a key feature of variable annuities, contrasting with fixed annuities, which offer guaranteed returns and a more conservative approach, without the investment options that variable annuities provide. Immediate annuities focus on providing income right away, and indexed annuities combine features of fixed and variable annuities but do not provide the same level of investment choice as variable annuities.

Therefore, variable annuities uniquely support investment into various sub-accounts, making this the correct answer.