65. A person owns a life annuity. He elects to receive his annuity payments monthly for the remainder of his life with 'ten years certain'. This means the insurer will make payments
Answer: B
The insurer will make payments for a minimum of 120 months and a maximum of the remainder of his life.
In the case of a life annuity with a 'ten years certain' clause, the payments are guaranteed for at least ten years (120 months). After this period, if the annuitant is still alive, the payments will continue for the remainder of their life.
A) for 120 months, if the insured lives that long.
This option is incorrect because it suggests that payments will only be made if the insured lives to 120 months. However, the 'ten years certain' provision guarantees payments for at least that duration, regardless of whether the insured is alive at the end of that period, as long as they have not yet passed away.
B) for a minimum of 120 months and a maximum of the remainder of his life.
This option accurately describes the terms of a life annuity with a 'ten years certain' feature. The insured is guaranteed to receive payments for at least ten years, and if they are still alive after that period, the payments will continue for as long as they live, which is the essence of this annuity type.
C) until his death, when his beneficiary begins receiving payments for 120 additional months.
This choice is incorrect as it misrepresents the structure of the annuity. The payments do not transition to a beneficiary after the insured's death for an additional 120 months; rather, the 'ten years certain' provision ensures that payments continue only to the insured for a minimum of ten years, and no additional payments are made to a beneficiary beyond that if the insured passes away.
D) during the 'period certain' after which the payments will be reduced, but they will continue for the rest of his life.
This option is also incorrect. 'Ten years certain' means that payments will continue for at least that duration, but they do not get reduced afterward; they simply continue for the lifetime of the insured if they survive the ten-year period.
Conclusion
Option B is definitively correct because it captures the essential characteristics of a life annuity with a 'ten years certain' clause. This ensures that payments are made for a minimum of 120 months and, if the annuitant is still alive, continue for the remainder of their life. The other options either misinterpret the conditions of the annuity or incorrectly detail the payment structure.