Rhode Island Life Insurance Practice Exam

If an annuitant dies before receiving payments equal to the contract value, what type of annuity payout ensures a beneficiary continues to receive payments?

1. Life Annuity

2. Installment Refund annuity

3. Joint Life Annuity

4. Period Certain Annuity

The correct answer is: Installment Refund annuity

The correct answer is the Installment Refund annuity. This type of annuity guarantees that if the annuitant passes away before receiving payments that total the initial investment (contract value), the remaining balance will be paid out to a designated beneficiary. This ensures that even though the annuitant may not live long enough to exhaust the total value of their investment in the annuity, the beneficiary will still receive the total amount through installment payments. It provides a level of financial security for the beneficiary, as they will continue to get payments until the value of the annuity has been fully distributed. In contrast, a Life Annuity only pays out for the lifetime of the annuitant, with no further benefits to a beneficiary after the annuitant’s death. A Joint Life Annuity covers more than one person and typically ceases when the last covered person dies, offering no guarantee of remaining payments to a beneficiary after both have passed. A Period Certain Annuity specifies a set time during which payments will be made but does not guarantee a continuation of payments if the annuitant dies before that period; instead, payments may just cease. Thus, the primary assurance of continuing payments to a beneficiary comes specifically from the Installment Refund ann