PSI Life Exam Practice Test

What is an annuity that guarantees a given number of income payments regardless of the annuitant's survival called?

1. Deferred annuity

2. Life annuity certain

3. Variable annuity

4. Immediate annuity

The correct answer is: Life annuity certain

The annuity that guarantees a specified number of income payments regardless of whether the annuitant is alive is called a life annuity certain. This type of annuity is structured to ensure that payments are made for a predetermined period, which could be for a specific number of years, irrespective of the annuitant’s lifespan. If the annuitant passes away before the end of this guaranteed payment period, the remaining payments are typically made to a designated beneficiary. This feature provides a safety net for both the annuitant and their beneficiaries, as it assures that the total amount invested in the annuity will be returned in the form of guaranteed payments over the specified term. In contrast, a deferred annuity starts payments at a later date, a variable annuity has payments that fluctuate based on the performance of underlying investments, and an immediate annuity begins payments right away but doesn't necessarily guarantee a fixed number of payments like a life annuity certain does.