Which statement about a guaranteed death benefit is true?

Which statement about a guaranteed death benefit is true?

• A. It protects the principal against loss due to market declines and pays beneficiaries at least the amount originally invested if death occurs before maturity
• B. It guarantees a fixed cash payout at death equal to the premiums paid
• C. It always pays the current account value at death
• D. It has no death benefit feature

Answer: (A)

A guaranteed death benefit is a rider on a variable annuity that provides a floor for the death benefit. If the contract owner dies before the payout phase (maturity or annuitization), the beneficiary is paid at least the amount originally invested, even if the account’s current value has fallen due to market declines. This protects the principal invested, so the beneficiary isn’t at risk of receiving less than the initial investment just because markets dipped. This is why the statement is correct: it describes the protection of principal and a minimum payout to beneficiaries upon death, regardless of market performance, as provided by the guaranteed death benefit. The other ideas don’t fit because a guaranteed death benefit is not a fixed payout simply equal to premiums paid, and it does not always pay the current account value. Also, a guaranteed death benefit is clearly a death benefit feature, not something with no death benefit at all.

A guaranteed death benefit is a rider on a variable annuity that provides a floor for the death benefit. If the contract owner dies before the payout phase (maturity or annuitization), the beneficiary is paid at least the amount originally invested, even if the account’s current value has fallen due to market declines. This protects the principal invested, so the beneficiary isn’t at risk of receiving less than the initial investment just because markets dipped.

This is why the statement is correct: it describes the protection of principal and a minimum payout to beneficiaries upon death, regardless of market performance, as provided by the guaranteed death benefit.

The other ideas don’t fit because a guaranteed death benefit is not a fixed payout simply equal to premiums paid, and it does not always pay the current account value. Also, a guaranteed death benefit is clearly a death benefit feature, not something with no death benefit at all.