South Carolina Life Insurance Practice Exam

What is the minimum guaranteed payment period for a life annuity?

1. 5 years

2. 10 years

3. 15 years

4. No guaranteed period

The correct answer is: 15 years

A life annuity is a financial product designed to provide a stream of income to an individual for the rest of their life. The minimum guaranteed payment period refers to a designated timeframe during which payments will be made, regardless of whether the annuitant is alive or deceased. The correct choice indicates that a minimum guaranteed payment period of 15 years is generally applicable. This term means that even if the annuitant passes away before the end of this 15-year period, the insurance company is obligated to continue making payments to the beneficiary or an estate until the full 15 years of payments have been completed. This feature ensures a level of protection for the beneficiary or annuitant and can be particularly important for individuals who seek to ensure their loved ones are provided for, even after their passing. In many life annuity contracts, this minimum guaranteed payment period serves to either compensate for the possibility of an early death or as a financial strategy to transfer wealth. It also aligns with common market practices and regulatory standards that help protect consumers in long-term financial planning situations.