South Carolina Life Insurance Practice Exam

Who actually receives income payments from an annuity?

1. The insurance company managing the annuity

2. The beneficiary named in the contract

3. The annuitant

4. The estate of the annuitant

The correct answer is: The annuitant

The correct answer is that the income payments from an annuity are received by the annuitant. The annuitant is the individual who has purchased the annuity and is typically the person whose life expectancy the payments are based on. Once the accumulation phase of the annuity concludes and the contract enters the payout phase, the annuitant receives regular income distributions according to the terms outlined in the annuity contract. Annuities are designed primarily for individuals to provide them with a steady stream of income, often during retirement. This stream of income can be structured in various ways, such as for a fixed period or for the rest of the annuitant’s life, which is determined by factors like age and gender. The payments are made until the end of the specified term or until the annuitant passes away, depending on the type of annuity purchased. In contrast, while beneficiaries and estates might come into play for death benefits or remaining account balances, it is the annuitant who directly receives the income payments during their lifetime. The insurer does manage the annuity but does not receive the payments; instead, they disburse them to the annuitant based on the agreement established in the annuity contract.