Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them?

• A. Joint and survivor annuity
• B. Refund annuity
• C. Life annuity certain
• D. Immediate annuity

Answer: (C)

The concept being tested is how annuity guarantees are structured. A life annuity with a period certain (often marketed as a life annuity certain) is designed to provide a minimum, fixed number of payments regardless of survival. That means the annuitant receives the guaranteed payments, and if death occurs before the period ends, the remaining payments are paid to a beneficiary. If the annuitant lives beyond the guaranteed period, payments continue according to the contract, but the standout feature is the guaranteed count of payments.

Other types don’t fit this guarantee of a fixed payment count. A joint and survivor annuity relies on two lives and typically continues beyond one death or ends based on survivorship rather than a set number of payments. A refund option focuses on returning the remaining value or a refund upon death, not guaranteeing a specific payment schedule. An immediate annuity starts payments right away but isn’t defined by a fixed-number guarantee. A standard life annuity pays as long as the recipient lives but does not guarantee a minimum number of payments regardless of survival.