California Life-Only & Accident and Health AgentLife InsuranceMedium
An individual is considering an annuity to supplement their retirement income. They are concerned about outliving their savings and want a guaranteed income stream that will last for their entire life, regardless of how long they live. Which type of annuity payout option would best meet this objective?
- AFixed Period Option
- BLife Only Option
- CJoint and Survivor Option
- DLump Sum
Show answer & explanationAnswer & explanation
Correct answer: B. Life Only Option
The Life Only option (also known as a Pure Life Annuity) guarantees income payments for the entire life of the annuitant, regardless of how long they live. This directly addresses the concern of outliving savings by providing a lifelong income stream.
Why the other options are wrong
- A. Fixed Period Option guarantees payments for a specific number of years, not for the annuitant's entire life.
- C. Joint and Survivor Option provides income for two lives, but the core need is for a single individual's lifetime income.
- D. Lump Sum pays the entire value at once, not a guaranteed income stream for life.
Life Only Annuity Payout
An annuity payout option that provides guaranteed income payments for the annuitant's entire life, ceasing upon their death, with no payments to beneficiaries.
- Provides the highest periodic income payment among life income options.
- Payments stop immediately upon the annuitant's death.
- No guarantee of principal return if annuitant dies early.
Memory trick: Life Only, Period Certain, Joint & Survivor: Annuity income flows.