34. A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments MUST the insurer make?
Answer: B
The insurer must make 60 remaining payments.
Since the annuitant dies after receiving monthly payments for 5 years, which is equivalent to 60 monthly payments, the insurer is obligated to continue making payments until the end of the 10-year term, resulting in a total of 60 remaining payments.
A) None.
This option is incorrect because the insurer is required to fulfill the payment terms of the annuity. Even though the annuitant has died, the contract stipulates that payments must continue for the entire duration of the annuity, thus making this option invalid.
B) 60 payments.
This is the correct answer as it accurately reflects the remaining payments owed by the insurer. The annuity guarantees payments for 10 years or until the total number of payments equates to 120 monthly installments; since 60 payments have already been made, 60 more payments are required.
C) 120 payments.
This option is incorrect because it suggests that the insurer would need to make a total of 120 additional payments. However, this does not take into account the 60 payments already received by the annuitant before their death, making this choice inaccurate.
D) One lump sum payment.
This option is also incorrect as it implies that the insurer would pay out a single lump sum instead of continuing the monthly payments. The terms of a certain annuity with an installment refund require ongoing monthly payments until the end of the 10-year period, not a lump sum.
Conclusion
In conclusion, the insurer must continue making 60 remaining payments under the terms of the 10-year certain annuity, as it guarantees payments for the full duration regardless of the annuitant's death. The other options do not align with the contractual obligations of the annuity, thereby confirming B as the definitive correct answer.