Rhode Island Life Insurance Practice Exam

Which settlement option pays a stated amount to an annuitant with no residual value to a beneficiary?

1. Life income

2. Fixed period

3. Joint and survivor income

4. Cash refund

The correct answer is: Life income

The option that provides a stated amount to an annuitant with no residual value to a beneficiary is life income. This settlement option involves the insurance company making periodic payments to the annuitant for their lifetime. Once the annuitant passes away, the payments stop, and there are no remaining funds to be passed on to beneficiaries. This characteristic directly addresses the key aspect of the question regarding the absence of residual value. In contrast, other options may include provisions that allow for payments to continue to beneficiaries or return some funds in specific circumstances. For instance, fixed period payments could provide income for a defined duration, potentially allowing for leftover amounts if the annuitant dies before the period ends. Joint and survivor income offers payments that continue for the lifetime of two individuals, which also allows for ongoing support after the first individual passes. The cash refund option compensates beneficiaries if the total received by the annuitant does not equal the initial investment, creating value for heirs. Thus, life income distinctly fulfills the criteria specified in the question.