PSI Life Exam Practice Test

The settlement option that pays a specified amount to an annuitant, but pays no residual value to a beneficiary is known as what?

1. Refund

2. Life income

3. Cash distribution

4. Installment payments

The correct answer is: Life income

The settlement option that pays a specified amount to an annuitant, while providing no residual value to a beneficiary, is known as a life income option. This arrangement guarantees the annuitant a series of payments for their lifetime, thus ensuring financial security during their retirement years. Once the annuitant passes away, no further payments will be made, meaning there is no remaining value to pass on to any beneficiaries. This characteristic is essential in understanding the appeal of life income options, as they prioritize the individual receiving the annuity, providing them with a steady income during their life. In contrast, refund options typically involve paying out the total premium back to beneficiaries if the annuitant dies before a certain amount has been paid in benefits. Cash distribution options involve taking a lump sum payment, which is not the same as a structured income. Installment payments might suggest additional death benefits based on the remaining time rather than lifetime income without residual benefits; therefore, they do not align with the definition of life income that specifically designates no leftover asset for beneficiaries.