Life Annuities with Guaranteed Payout guarantee payments for a set period. Which statement best describes this product?

• A. Guarantees payments for a set period.
• B. Pays until the annuitant dies.
• C. Increases payments annually.
• D. Payments end at death even if capital runs out.

Answer: (A)

A life annuity with a guaranteed payout period is designed to provide income for life but with a safety net: a minimum number of payments are guaranteed even if the annuitant dies early. This makes the statement that it guarantees payments for a set period the best description. If death occurs before the end of the guaranteed period, payments continue to a beneficiary for the remaining years of that period. If the annuitant is alive at the end of the guaranteed period, payments continue for life. This combination is what differentiates it from a pure life-only annuity (which ends at death with no beneficiary guarantee), from one that simply increases payments, or from one that ends payments at death regardless of any period.