South Carolina Life Insurance Practice Exam

What is the difference between the annuitant and the beneficiary of an annuity?

1. The beneficiary receives payments during the annuitization period

2. The annuitant receives payments after death

3. The beneficiary receives benefits after the annuitant's death

4. The annuitant has no rights after death

The correct answer is: The beneficiary receives benefits after the annuitant's death

The distinction between the annuitant and the beneficiary in an annuity context is primarily defined by the roles they play with respect to payment distributions. In this case, the beneficiary is the individual designated to receive benefits after the annuitant's death. This is crucial because annuities are designed to provide income during the lifetime of the annuitant, but they also establish a financial legacy for their beneficiaries. When the annuitant passes away, if there are remaining funds or benefits due from the annuity contract, the beneficiary is entitled to receive those benefits. This can include a lump sum payment or a continuation of income, depending on the specific terms of the annuity contract. This characteristic helps ensure that the financial planning goals of the annuitant can extend beyond their lifetime, providing security for loved ones. The correct choice emphasizes the beneficiary's role in receiving assets after the annuitant's death, underscoring the importance of including a beneficiary in an annuity contract to ensure a smooth transfer of benefits. By properly designating a beneficiary, individuals can make informed decisions about their financial futures and how their assets will be allocated after their passing.