West Virginia State Life Insurance Practice Exam

What type of annuity pays benefits for a specified period, regardless of whether the annuitant is alive?

1. Life annuity

2. Term certain annuity

3. Fixed-period annuity

4. Joint and survivor annuity

The correct answer is: Term certain annuity

The term "term certain annuity" refers to a financial product designed to provide payments for a predetermined length of time, irrespective of the annuitant's survival. This means that if the annuitant passes away before the end of the specified term, the benefits continue to be paid to a beneficiary or designated party until the term concludes. This structure allows individuals to create a guaranteed income stream for a defined period, ensuring that financial support is provided whether or not the annuitant is alive. This feature can be particularly advantageous for planning purposes, as it helps beneficiaries receive some level of financial security and ensures that the payments are made for the full term. In contrast, a life annuity would only make payments while the annuitant is alive, ceasing upon their death, which means it does not guarantee payments for a specific duration. A fixed-period annuity typically serves a similar purpose to a term certain annuity but is regarded more broadly and may not focus solely on the specific term aspect. A joint and survivor annuity, on the other hand, involves two annuitants, offering ongoing payments until the last surviving individual passes away and is more concerned with survivorship than a set period of payment.