Washington Life Producer Practice Exam

What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made if the annuitant dies during the distribution period?

1. Life income

2. Refund annuity

3. Accumulation annuity

4. Joint annuity

The correct answer is: Refund annuity

The correct choice, refund annuity, is designed specifically to protect the beneficiary in the event that the annuitant passes away during the distribution phase. In a refund annuity, if the total income payments made to the annuitant are less than the total premium paid for the annuity, the remaining balance is returned to the beneficiary. This structure ensures that the investment in the annuity is not lost and provides additional security for the annuitant's family. In contrast, a life income annuity provides payments for the lifetime of the annuitant but does not guarantee that a beneficiary will receive anything if the annuitant dies. An accumulation annuity focuses on the growth of the investment rather than the payout during the annuitant's lifetime and does not specifically address beneficiary payouts. A joint annuity typically provides income for two lives (e.g., spouses) but does not specifically address refunding the difference between the value and payments made if one dies during the distribution period. Therefore, a refund annuity is the most fitting choice as it addresses the need for beneficiaries to receive the unutilized portion of the annuity upon the death of the annuitant during the payout phase.