California Life-Only & Accident and Health AgentLife InsuranceEasy
A 65-year-old individual is considering an annuity that would provide a guaranteed income for their entire life, but also wants to ensure that if they die prematurely, their beneficiaries would receive payments for a minimum of 10 years. Which annuity payout option best fits these requirements?
- ALife with 10-Year Period Certain Annuity
- BLife Only Annuity
- CJoint and Survivor Annuity
- DRefund Life Annuity
Show answer & explanationAnswer & explanation
Correct answer: A. Life with 10-Year Period Certain Annuity
The 'Life with Period Certain' option guarantees income for the annuitant's life, but also ensures that if the annuitant dies before the specified period (e.g., 10 years), payments continue to a beneficiary for the remainder of that period.
Why the other options are wrong
- B. A Life Only Annuity provides income only for the annuitant's life and ceases upon their death, with no guarantee to beneficiaries.
- C. A Joint and Survivor Annuity covers two or more lives, paying until the last annuitant dies, not guaranteeing a minimum period to beneficiaries.
- D. A Refund Life Annuity guarantees that the total payout will at least equal the purchase price, but does not guarantee payments for a specific period after the annuitant's death if the purchase price has already been exceeded.
Life with Period Certain Annuity
An annuity payout option that guarantees income for the annuitant's entire life, but also ensures payments continue to a beneficiary for a specified minimum period if the annuitant dies prematurely.
- Provides income for life to the annuitant.
- Guarantees payments for a set minimum period (e.g., 5, 10, 20 years).
- If annuitant dies before period ends, beneficiary receives remaining payments.
- If annuitant lives beyond the period, payments continue until death.
Memory trick: Life's Certain Period ensures income, living or not, for a set time.