Massachusetts Life Producer Practice Exam

What characterizes a life annuity with period certain?

1. Guaranteeing benefit payments for a stated minimum number of years

2. Providing a lifetime income without any period certain

3. Offering variable payments based on market performance

4. Securing a flat beneficiary payout upon death

The correct answer is: Guaranteeing benefit payments for a stated minimum number of years

A life annuity with a period certain is designed to provide income for the lifetime of the annuitant while also guaranteeing payments for a specified minimum number of years. This means that even if the annuitant passes away before the end of this period, the insurer is obligated to continue making payments to a designated beneficiary until the end of the stated term. This feature offers a level of security for both the annuitant and their beneficiaries, as it ensures that payments will be made for at least the guaranteed period regardless of when the annuitant dies. In contrast, the other characteristics described do not align with the definition of a life annuity with period certain. For instance, an annuity providing lifetime income without a period certain does not guarantee benefits for a specified number of years, which can create financial uncertainty for beneficiaries. Likewise, variable payments based on market performance pertain to variable annuities rather than fixed income annuities like the one in question. Lastly, securing a flat beneficiary payout upon death does not reflect the nature of an annuity with a period certain; instead, it indicates a fixed death benefit, which is a different product altogether. Thus, the unique feature of guaranteeing payments for a stated minimum number of years is what distinctly