South Carolina Life Insurance Practice Exam

What type of annuity is suitable for someone who wants to receive the largest benefit only for the duration of the annuitant's life?

1. Fixed premium deferred annuity

2. Flexible premium deferred annuity

3. Life annuity

4. Joint life annuity

The correct answer is: Life annuity

The life annuity is the best choice for someone seeking the largest benefit for the duration of the annuitant's life. This type of annuity guarantees periodic payments to the annuitant until their death, providing a steady income stream that can vary depending on the specifics of the contract, potentially including options like a single life payout. By focusing solely on the individual's lifespan, the life annuity ensures that the payments continue regardless of how long the annuitant lives, maximizing the benefit they receive while eliminating the risk of outliving their financial resources. This structure can provide peace of mind, knowing that the payments are secured for their lifetime. In contrast, options such as fixed or flexible premium deferred annuities primarily focus on accumulation of funds before annuitization and do not provide immediate lifetime income benefits. The joint life annuity, while beneficial for couples, pays out over the lifetimes of two individuals, which may not align with the intent of maximizing benefits solely for one person's life.