South Carolina Life Insurance Practice Exam

Can a business or corporation be designated as an annuitant in an annuity contract?

1. Yes, they can

2. No, only natural persons can

3. Only if specified in the contract

4. Yes, but only in certain types of annuities

The correct answer is: No, only natural persons can

In the context of annuity contracts, a fundamental aspect is that an annuitant must be a living individual, as they are the person upon whose life the contract’s benefits are based. Annuities are structured to provide benefits that are contingent on the life of an individual—typically the annuitant receives payment from the annuity during their lifetime. A business or corporation, being a legal entity but not a living person, does not qualify as an annuitant in these contracts. This distinction is crucial because the annuity payments are tied to the lifespan of an individual; thus, it would be logically inconsistent and impractical to designate a non-human entity as an annuitant. The option stating that only natural persons can be annuitants aligns with the fundamental definitions and regulations governing annuities, ensuring that the contracts operate as intended. It's vital for individuals studying life insurance and annuities to understand this requirement, as it forms a core principle in the administration and structure of these financial products.