South Carolina Life Insurance Practice Exam

What is the primary purpose of a life annuity with a 15-year period certain?

1. To provide payments for the annuitant's lifetime

2. To ensure payments for a minimum of 15 years unless the annuitant dies

3. To guarantee payments only if the annuitant lives for more than 15 years

4. To offer a lump sum payment after 15 years

The correct answer is: To ensure payments for a minimum of 15 years unless the annuitant dies

A life annuity with a 15-year period certain is structured to provide a stream of income for the life of the annuitant, but it also incorporates a guarantee. The primary purpose of this type of annuity is to ensure that payments are made for a minimum of 15 years, regardless of whether the annuitant lives that long. If the annuitant passes away before the 15-year period is up, the payments will continue to be made to a beneficiary for the remaining duration of that 15-year term. This feature offers a level of security and assurance that funds will be distributed, making it an attractive option for individuals concerned about providing financial support to dependents or loved ones in the event of their unexpected death early in the contract. In contrast, the other options do not accurately capture the essence of the 15-year period certain. While a life annuity does provide lifetime payments, the significant aspect of this specific annuity is the 15-year guaranteed payout, which adds an important layer of financial planning. Guarantees based solely on whether the annuitant lives beyond 15 years are not applicable to this structure, nor is there a provision for lump sum payments after the specified period; the focus is on regular income distribution