Which annuity bases its payments on a shortened life expectancy?

Which annuity bases its payments on a shortened life expectancy?

• A. Impaired Life Annuity
• B. Prescribed Annuity
• C. Participating Annuity
• D. Indexed Annuity Payments

Answer: (A)

An annuity that bases payments on a shortened life expectancy uses health-related mortality assumptions to determine higher ongoing payments. With an impaired life annuity, the insurer recognizes a reduced lifespan and calculates payments accordingly, so the annuitant receives larger payments because the expected payout period is shorter. This contrasts with other annuity types that don’t tie payments to a person’s shortened life expectancy—indexed annuities adjust for inflation, participating annuities reflect insurer investment results, and prescribed annuities follow tax rules rather than individual health-based life expectancy.

An annuity that bases payments on a shortened life expectancy uses health-related mortality assumptions to determine higher ongoing payments. With an impaired life annuity, the insurer recognizes a reduced lifespan and calculates payments accordingly, so the annuitant receives larger payments because the expected payout period is shorter. This contrasts with other annuity types that don’t tie payments to a person’s shortened life expectancy—indexed annuities adjust for inflation, participating annuities reflect insurer investment results, and prescribed annuities follow tax rules rather than individual health-based life expectancy.