Washington Life Producer Practice Exam

Which settlement option pays a stated amount to an annuitant, but no residual value to a beneficiary?

1. Cash refund

2. Life income

3. Fixed period

4. Joint and survivor

The correct answer is: Life income

The life income settlement option is designed to pay a predetermined amount to the annuitant for the duration of their lifetime. Once the annuitant passes away, any remaining funds from the annuity do not go to a beneficiary; instead, the payments cease, and there is no residual value left. This option provides the annuitant with a stable income for as long as they live, ensuring that they will not outlive their income stream, but it also means that if the annuitant dies shortly after starting to receive payments, the insurer keeps the remaining funds. In this context, it's important to note other options. The cash refund option allows for a refund of any unused funds to the beneficiary if the annuitant dies before receiving payments equivalent to the total premium paid. The fixed period option guarantees payments for a set number of years, regardless of whether the annuitant is alive, ensuring that payments continue until the end of that period. The joint and survivor option pays benefits over the lifetimes of two individuals, with payments continuing to a survivor after the first one passes away, thus providing a residual income to the remaining beneficiary. The life income option effectively focuses solely on the annuitant's financial needs without providing any benefit to heirs,