38. 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 received payments for 5 years, which totals 60 monthly payments, the insurer is obligated to continue making monthly payments for the remaining 5 years to fulfill the terms of the 10-year certain annuity.
A) None.
This option is incorrect because the annuity guarantees payments for a total of 10 years regardless of the annuitant's death. Payments must continue until the total guaranteed period is fulfilled.
B) 60 payments.
This is the correct answer as it reflects the remaining payments due under the terms of the annuity. Since the annuitant has already received payments for 5 years, the insurer must continue to make monthly payments for the remaining 5 years, which amounts to 60 payments.
C) 120 payments.
This option is incorrect because it misinterprets the duration of the annuity. The total of 120 payments would imply a 10-year payout at a different payment frequency, but since only 5 years have been completed, only 60 payments remain.
D) One lump sum payment.
This option is incorrect as it does not align with the structured payout of the annuity. The terms specify monthly payments over the remaining period rather than a single lump sum payment upon the annuitant's death.
Conclusion
The correct answer is that the insurer must make 60 remaining payments, as this adheres to the stipulations of the 10-year certain annuity. Other options fail to recognize the guaranteed nature of the payments, which extends beyond the life of the annuitant to complete the agreed payment term.