Which type guarantees payments for a set period regardless of survival?

Which type guarantees payments for a set period regardless of survival?

• A. Life Annuity with Cash Refund
• B. Fixed-term Annuity
• C. Immediate Annuity
• D. Joint Life Annuity

Answer: (B)

The idea being tested is how annuities handle income over time. A fixed-term annuity guarantees a stream of payments for a pre-set number of years, and those payments are not tied to whether the recipient is still alive to receive them. In other words, you are promised a defined amount of money for a defined horizon, and after that horizon ends, payments stop (or the contract moves to another arrangement). This makes it the only option among common annuity structures that delivers a guaranteed payment schedule regardless of survival. By contrast, a life annuity pays as long as the policyholder is alive; if death occurs early, payments stop, so longevity directly affects the duration. A life annuity with cash refund still centers on lifetime payments, with a refund feature to return the purchase value after death, but the ongoing payments depend on survival. An immediate annuity is about when payments begin, not the length of time they continue, and a joint life annuity continues payments to a survivor, so the expected payment period depends on two lifetimes rather than a fixed horizon. So the fixed-term arrangement is the one that guarantees payments for a set period, independent of whether the person is alive to receive them.

The idea being tested is how annuities handle income over time. A fixed-term annuity guarantees a stream of payments for a pre-set number of years, and those payments are not tied to whether the recipient is still alive to receive them. In other words, you are promised a defined amount of money for a defined horizon, and after that horizon ends, payments stop (or the contract moves to another arrangement). This makes it the only option among common annuity structures that delivers a guaranteed payment schedule regardless of survival.

By contrast, a life annuity pays as long as the policyholder is alive; if death occurs early, payments stop, so longevity directly affects the duration. A life annuity with cash refund still centers on lifetime payments, with a refund feature to return the purchase value after death, but the ongoing payments depend on survival. An immediate annuity is about when payments begin, not the length of time they continue, and a joint life annuity continues payments to a survivor, so the expected payment period depends on two lifetimes rather than a fixed horizon.

So the fixed-term arrangement is the one that guarantees payments for a set period, independent of whether the person is alive to receive them.