Which statement is true regarding the pure life annuity settlement option?

Which statement is true regarding the pure life annuity settlement option?

• A. Offers low monthly income
• B. Provides a high income
• C. Includes a cash value component
• D. Is available only at retirement

Answer: (B)

The pure life annuity settlement option is designed to provide income for the lifetime of the annuitant, which often results in a higher monthly payment compared to other settlement options that may offer a return of principal or cash value. The reason this option provides a high income is because it takes on the risk of longevity—paying out for as long as the annuitant lives without any guarantees for a certain period or a cash value building up. In essence, by focusing solely on providing income for the life of the annuitant, the insurer is able to give a larger monthly payout, reflecting the trade-off that the annuitant will not receive benefits after their death, regardless of how long they might live. This makes the pure life annuity a potentially attractive option for those seeking maximum income in retirement without concern for leaving a legacy or any remaining value to beneficiaries. It is important for individuals to assess their own situations carefully to determine if the higher income aligned with the lifetime payout meets their needs.

The pure life annuity settlement option is designed to provide income for the lifetime of the annuitant, which often results in a higher monthly payment compared to other settlement options that may offer a return of principal or cash value. The reason this option provides a high income is because it takes on the risk of longevity—paying out for as long as the annuitant lives without any guarantees for a certain period or a cash value building up. In essence, by focusing solely on providing income for the life of the annuitant, the insurer is able to give a larger monthly payout, reflecting the trade-off that the annuitant will not receive benefits after their death, regardless of how long they might live.

This makes the pure life annuity a potentially attractive option for those seeking maximum income in retirement without concern for leaving a legacy or any remaining value to beneficiaries. It is important for individuals to assess their own situations carefully to determine if the higher income aligned with the lifetime payout meets their needs.