Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceMedium
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 7 years, what will happen to the remaining payments?
- AThe remaining cash value of the annuity will be paid in a lump sum to the beneficiary.
- BThe annuity company will keep the remaining payments, as the client outlived the minimum guarantee.
- CThe remaining 3 years of payments will continue to a designated beneficiary.
- DAll payments will cease immediately upon the client's death.
Show answer & explanationAnswer & explanation
Correct answer: C. The remaining 3 years of payments will continue to a designated beneficiary.
A 'life with period certain' annuity guarantees payments for the annuitant's lifetime, but if the annuitant dies before the end of the specified 'period certain' (in this case, 10 years), the remaining payments for that period will be made to the designated beneficiary.
Why the other options are wrong
- A. This is not how 'period certain' options work; payments continue, not a lump sum of remaining cash value.
- B. The 'period certain' ensures payments continue for the guaranteed period, even if the annuitant dies earlier.
- D. This describes a 'straight life income' annuity, not a 'life with period certain'.
Life with Period Certain Annuity Payout
An annuity payout option that guarantees income for the annuitant's life, but also guarantees payments for a minimum 'period certain' (e.g., 10 or 20 years) to a beneficiary if the annuitant dies sooner.
- Payments for annuitant's life
- Guaranteed minimum number of payments (period certain)
- Beneficiary receives payments if annuitant dies within period certain
- Offers a balance between income for life and beneficiary protection
Memory trick: Annuity income: how long, and for whom?