What best describes a pure life annuity?

What best describes a pure life annuity?

• A. It provides a fixed amount for a minimum term
• B. It provides the highest monthly benefits for life
• C. It includes increased payments over time
• D. It guarantees benefits only for a certain period

Answer: (B)

A pure life annuity is designed to provide the highest monthly benefits for the lifetime of the annuitant. This type of annuity pays out a regular income stream until the death of the annuitant, with no guaranteed period for payments. Essentially, the benefit stops upon the death of the individual, making it a straightforward way to secure lifelong income without the complexities of additional features or guaranteed terms. The other options describe different characteristics that do not apply to a pure life annuity. For instance, the first option suggests a minimum term, which implies that payments would continue for a specific duration whether the annuitant is alive or not, contrary to the essence of a pure life annuity. The third option discusses increased payments over time, which does not pertain to a pure life annuity as it typically offers a level payment throughout the duration of the annuitant’s life. Lastly, the mention of guaranteed benefits for a certain period reflects features found in other types of annuities, such as period certain annuities, rather than a pure life annuity where payments end at death regardless of any minimum timeframe.

A pure life annuity is designed to provide the highest monthly benefits for the lifetime of the annuitant. This type of annuity pays out a regular income stream until the death of the annuitant, with no guaranteed period for payments. Essentially, the benefit stops upon the death of the individual, making it a straightforward way to secure lifelong income without the complexities of additional features or guaranteed terms.

The other options describe different characteristics that do not apply to a pure life annuity. For instance, the first option suggests a minimum term, which implies that payments would continue for a specific duration whether the annuitant is alive or not, contrary to the essence of a pure life annuity. The third option discusses increased payments over time, which does not pertain to a pure life annuity as it typically offers a level payment throughout the duration of the annuitant’s life. Lastly, the mention of guaranteed benefits for a certain period reflects features found in other types of annuities, such as period certain annuities, rather than a pure life annuity where payments end at death regardless of any minimum timeframe.