Which annuity option guarantees payments for life and pays remaining basis if death occurs before total payments equal basis?

Which annuity option guarantees payments for life and pays remaining basis if death occurs before total payments equal basis?

• A. Pure life
• B. Life with period certain
• C. Life with refund
• D. Life with contingency

Answer: (C)

The main idea here is that an annuity payout option can provide lifetime income while also protecting a portion of the original investment for a beneficiary if the annuitant dies early. The option described guarantees ongoing payments for life and, if death occurs before the total payments equal the original investment (the basis), the remaining amount is paid to a beneficiary. That is exactly the refund feature: the payments continue for life, and any unreceived portion of the basis is refunded. So this is life with refund. It ensures the annuitant receives payments for life, and if death occurs before the total payments reach the basis, the difference is paid to a beneficiary. Pure life would stop with the holder’s death and offer no refund. Life with period certain guarantees payments for a set period, not for the remainder of the basis after death. Life with contingency isn’t a standard, and wouldn’t necessarily provide a refund of the remaining basis.

The main idea here is that an annuity payout option can provide lifetime income while also protecting a portion of the original investment for a beneficiary if the annuitant dies early. The option described guarantees ongoing payments for life and, if death occurs before the total payments equal the original investment (the basis), the remaining amount is paid to a beneficiary. That is exactly the refund feature: the payments continue for life, and any unreceived portion of the basis is refunded.

So this is life with refund. It ensures the annuitant receives payments for life, and if death occurs before the total payments reach the basis, the difference is paid to a beneficiary. Pure life would stop with the holder’s death and offer no refund. Life with period certain guarantees payments for a set period, not for the remainder of the basis after death. Life with contingency isn’t a standard, and wouldn’t necessarily provide a refund of the remaining basis.