77. 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
Payments are made for a minimum of 120 months and a maximum of the remainder of his life.
The life annuity with "ten years certain" guarantees that the insurer will make payments for at least 120 months. If the annuitant lives longer than ten years, payments will continue for the duration of their life.
A) for 120 months, if the insured lives that long.
This option is incorrect because it implies that payments will cease after 120 months regardless of whether the annuitant is still alive. However, the "ten years certain" provision ensures payments continue beyond this minimum if the annuitant survives.
B) for a minimum of 120 months and a maximum of the remainder of his life.
This option is correct as it accurately reflects the conditions of a life annuity with "ten years certain." The annuitant is guaranteed payments for at least ten years (120 months), but if they live longer, they will continue to receive payments for the rest of their life.
C) until his death, when his beneficiary begins receiving payments for 120 additional months.
This option is incorrect because, under this annuity structure, the beneficiary does not automatically receive payments for an additional 120 months after the annuitant's death. Payments are guaranteed for the specified ten years but do not extend to a beneficiary in this manner.
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 misleading as it suggests that payments will be reduced after the ten-year period. In reality, the payments continue at the same rate for the remainder of the annuitant's life after the ten years, without any reduction.
Conclusion
Option B is the definitive correct answer as it fully encompasses the structure of a life annuity with a "ten years certain" clause, ensuring both a minimum payment period and continued payments for the annuitant's life. All other options misinterpret the terms of the annuity, either by implying premature cessation of payments or misrepresenting the beneficiary's entitlement.