California Life-Only & Accident and Health AgentLife InsuranceHard
An individual is planning for retirement and wants to ensure they have a guaranteed income stream for as long as they live, regardless of how long that may be. They also want to ensure that if they die prematurely, a designated beneficiary will continue to receive payments for a minimum of 10 years. Which annuity payout option should they choose?
- AJoint and Survivor Annuity
- BLife with Period Certain
- CLife Only
- DRefund Life Annuity
Show answer & explanationAnswer & explanation
Correct answer: B. Life with Period Certain
A Life with Period Certain annuity guarantees payments for the annuitant's lifetime. However, if the annuitant dies before the end of the 'period certain' (e.g., 10 years), the payments will continue to the beneficiary for the remainder of that period, satisfying both requirements.
Why the other options are wrong
- A. Joint and Survivor Annuity provides income for two lives, not a guaranteed period for a beneficiary after a single annuitant's death.
- C. Life Only provides income for life but ceases upon death, with no beneficiary payout.
- D. Refund Life Annuity guarantees total payments will equal at least the purchase price, but not necessarily for a set period if the annuitant dies early.
Life with Period Certain Annuity
An annuity payout option that guarantees income payments for the annuitant's entire life, and if the annuitant dies before a specified 'period certain' (e.g., 10 or 20 years), the payments continue to a beneficiary for the remainder of that period.
- Guaranteed income for annuitant's life
- Guarantees payments for a minimum period (e.g., 10 years)
- Beneficiary receives payments if annuitant dies within the period certain
- Combines longevity protection with a death benefit feature
Memory trick: Annuity payouts are your 'retirement income blueprint'.