Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesMedium
A Florida licensed agent is explaining the benefits of an annuity to a prospective client. The client is concerned about outliving their income and wants a guaranteed stream of payments for their entire life. Which annuity payout option should the agent recommend?
- AFixed Period Installment
- BStraight Life Income
- CRefund Life Annuity
- DLife Income with Period Certain
Show answer & explanationAnswer & explanation
Correct answer: B. Straight Life Income
A straight life income (or pure life annuity) provides the highest possible periodic income to the annuitant for as long as they live, with payments ceasing upon their death, addressing the client's concern about outliving income.
Why the other options are wrong
- A. This option pays for a fixed period, not for the annuitant's entire life, and does not guarantee payments will last as long as the annuitant lives.
- C. This option guarantees that if the annuitant dies early, a beneficiary receives the remainder of the principal, which also results in lower periodic payments.
- D. While providing lifetime income, this option guarantees payments for a minimum period, which means the periodic income is lower than a straight life income.
Straight Life Income Annuity
An annuity payout option that provides the annuitant with the highest possible periodic income for their lifetime, with payments ceasing entirely upon their death.
- Maximum income for life
- No payments to beneficiaries after death
- Highest risk of forfeiture for beneficiaries
Memory trick: Life's straight and true, income for you, 'til death do part.