Life & Health Insurance Exam (National Portion)Policy Provisions, Options, and RidersHard
A deferred annuity contract holder dies during the accumulation period. What will the beneficiary typically receive?
- AThe full accumulated value of the annuity, less any surrender charges.
- BNothing, as the annuity had not yet entered the annuitization period.
- CThe accumulated value or the total premiums paid, whichever is greater.
- DOnly the premiums paid into the annuity, without any interest.
Show answer & explanationAnswer & explanation
Correct answer: C. The accumulated value or the total premiums paid, whichever is greater.
If the annuitant (or contract holder) dies during the accumulation period, the beneficiary typically receives either the accumulated value of the annuity or the total premiums paid, whichever is greater, to ensure a death benefit while avoiding loss of principal.
Why the other options are wrong
- A. While surrender charges might apply if the owner surrendered, for a death benefit, it's usually the greater of accumulated value or premiums.
- B. Deferred annuities almost always have a death benefit, even if annuitization hasn't begun.
- D. This would be a loss if the annuity had grown in value.
Annuity Death Benefit (Accumulation Phase)
The amount paid to a beneficiary if the annuity owner dies before annuitization begins; typically the greater of accumulated value or total premiums paid.
- Applies during accumulation period
- Protects principal and growth
- Avoids forfeiture upon early death
Memory trick: ACCUMULATE or PAY, WHICHEVER'S MORE