West Virginia State Life Insurance Practice Exam

What is the type of annuity that provides the largest possible monthly payment to an individual annuitant?

1. Straight life annuity

2. Fixed annuity

3. Variable annuity

4. Deferred annuity

The correct answer is: Straight life annuity

The type of annuity that provides the largest possible monthly payment to an individual annuitant is a straight life annuity. This annuity guarantees payments for the lifetime of the annuitant without offering any survivor benefits. As a result, the payments are generally higher compared to other types of annuities. Since the annuitant assumes the risk of living a shorter life, the insurer offers a larger monthly payment during the lifetime of the annuitant. In contrast, fixed and variable annuities provide different benefits and structures. A fixed annuity offers guaranteed payouts but typically does not produce the highest amount compared to a straight life annuity. A variable annuity's payouts can fluctuate based on investment performance, which means they may not guarantee the largest payment. A deferred annuity, on the other hand, postpones payments until a specified future date, meaning it cannot provide the current maximum payout since the payments have not yet commenced. Thus, the straight life annuity is designed explicitly for maximizing income throughout the annuitant's lifetime.