Question 83

The cash value is paid to the beneficiary.

When an annuitant dies during the accumulation period, the cash value in the annuity is transferred to the designated beneficiary. This ensures that the funds are passed on as intended, providing financial support to the beneficiary.

A) The cash value is paid to the beneficiary.

This option is correct as it accurately reflects the standard practice in annuities. Upon the death of the annuitant during the accumulation phase, the cash value is typically payable to the beneficiary named in the contract, allowing them to access the funds without going through probate.

B) The cash value is paid into the estate.

This option is incorrect because the cash value in the annuity does not automatically go into the annuitant's estate. Instead, it is specifically designated to be paid to the beneficiary, which helps avoid the complexities of estate settlement.

C) The cash value is paid to the IRS.

This option is incorrect as well. The Internal Revenue Service does not receive the cash value of the annuity upon the annuitant's death. Instead, taxes may apply to the beneficiary when they withdraw the funds, but the IRS does not directly take the cash value.

D) The company keeps the cash value.

This option is incorrect because the insurance company does not retain the cash value upon the death of the annuitant during the accumulation period. The contractual obligation is to pay the cash value to the designated beneficiary, ensuring that the funds are distributed accordingly.

Conclusion

The correct answer, that the cash value is paid to the beneficiary, aligns with the principles governing annuities and their beneficiaries. Other options fail to reflect the contractual nature of annuities, which specifically aim to provide financial benefits to a designated individual upon the annuitant's death, thus safeguarding the interests of the beneficiary.