Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceHard
A client is 70 years old and is receiving income payments from an annuity. They elected a 'life with 10-year period certain' payout option. If the client dies after receiving payments for 7 years, how many additional years of payments will their beneficiary receive?
- A3 years
- B10 years
- C0 years
- D7 years
Show answer & explanationAnswer & explanation
Correct answer: A. 3 years
A 'life with period certain' annuity guarantees payments for the annuitant's lifetime OR for a specified period (the 'period certain'), whichever is longer. If the annuitant dies before the period certain ends, the remaining guaranteed payments are made to their beneficiary. In this case, 10 years (period certain) - 7 years (payments received) = 3 years remaining for the beneficiary.
Why the other options are wrong
- B. This would be the case if the annuitant died immediately, leaving the full period certain.
- C. Incorrect; there is a remaining guaranteed period.
- D. This would be the case if the annuitant died after 3 years, leaving 7 years remaining.
Life with Period Certain Annuity
An annuity payout option that guarantees income payments for the annuitant's lifetime, but if the annuitant dies before a specified 'period certain' (e.g., 10, 15, 20 years) ends, the remaining payments are guaranteed to a beneficiary.
- Guaranteed for life or period certain, whichever is longer
- Protects against early death during the period certain
- Beneficiary receives remaining payments if annuitant dies early
- Offers a balance of lifetime income and beneficiary protection
Memory trick: Life guarantees, period protects.