Kristi purchases an annuity that will pay her husband an income for 15 years. If he dies, this income will become payable to their children for the remainder of the period. Kristi has what kind of annuity?

• A. Temporary annuity certain
• B. Life annuity
• C. Annuity due
• D. Fixed-period annuity

Answer: (A)

The situation describes a fixed-period, or period-certain, annuity. It guarantees payments for a specific number of years (15) regardless of how long the annuitant lives. If the primary recipient dies before the period ends, the remaining payments are made to a designated beneficiary for the rest of that period. Here, Kristi’s annuity pays her husband for 15 years, and if he dies, the children receive the remaining payments for the remainder of the 15-year span. That exactly fits a temporary annuity certain. It’s not a life annuity because the payments aren’t contingent on one person’s lifetime, and it isn’t about payments at the beginning of the period (annuity due).