Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceEasy
A 50-year-old individual is receiving income payments from an annuity. They elected a 'life with 10-year period certain' payout option. If the annuitant dies after receiving payments for 7 years, how many more years will payments continue to their beneficiary?
- A3 years
- B7 years
- C10 years
- D0 years
Show answer & explanationAnswer & explanation
Correct answer: A. 3 years
Under a 'life with 10-year period certain' option, payments are guaranteed for at least 10 years. If the annuitant dies before the 10 years are up, the remaining guaranteed payments (10 - 7 = 3 years) will be paid to the beneficiary.
Why the other options are wrong
- B. This would mean the beneficiary receives payments equal to the period the annuitant received them, which is incorrect.
- C. This would imply the full period certain restarts, which is not how it works; only the remaining guaranteed period is paid.
- D. This would be the case for a straight life annuity, but not for a period certain option.
Life with Period Certain Annuity Payout
An annuity payout option that guarantees income payments for the annuitant's lifetime, but also for a specified minimum period (the 'period certain') even if the annuitant dies sooner.
- Payments guaranteed for at least the 'period certain'
- If annuitant dies during the period certain, beneficiary receives remaining payments
- If annuitant outlives the period certain, payments continue until death
Memory trick: Annuity choices: life's a journey, but some paths have guaranteed stops.