PSI Life Exam Practice Test

What typically happens once an annuitant passes away?

1. The annuity reverts back to the insurance provider

2. Benefits are paid to the named beneficiary

3. The remaining balance is refunded to the estate

4. The annuity is voided

The correct answer is: Benefits are paid to the named beneficiary

When an annuitant passes away, the standard procedure is that benefits are paid to the named beneficiary. This arrangement is foundational to many annuity contracts, where the owner designates a beneficiary who will receive the remaining benefits or payout from the annuity upon the annuitant's death. This provision allows for the transfer of financial assets to the designated person, ensuring that the funds accumulated or the promised income stream from the annuity goes to the intended recipient rather than lapsing into the estate or reverting to the insurance provider. While some annuities may have different terms regarding what occurs after the death of the annuitant, most commonly, the named beneficiary will receive the benefits. This system serves to provide financial security and continuity for the loved ones of the annuitant, reflecting an essential purpose of annuities in estate planning and wealth transfer.