South Carolina Life Insurance Practice Exam

What are the two types of refund life annuities?

1. Cash refund and installment refund

2. Guaranteed refund and variable refund

3. Immediate refund and deferred refund

4. Joint refund and survivor refund

The correct answer is: Cash refund and installment refund

The correct response identifies the two types of refund life annuities as cash refund and installment refund. In a cash refund life annuity, if the annuitant passes away before receiving total payments equal to the premium paid, the insurance company returns the remaining balance to the beneficiary in a lump sum. This option ensures that the investment has a return, regardless of the annuitant's lifespan. On the other hand, an installment refund life annuity works slightly differently. If the annuitant dies before the total of the premiums has been paid out, the remaining value is not paid as a lump sum but instead distributed to the beneficiary in regular installment payments. This option provides ongoing financial support over time, making it a suitable choice for beneficiaries who require stability in their income stream. These two forms of refund life annuities cater to different needs and preferences regarding how beneficiaries might want to receive funds after the annuitant's death, illustrating their relevance in estate planning and financial security considerations.