8. Which contract promises to pay the owner a guaranteed minimum income every year for as long as the individual lives?
Answer: A
A life annuity promises to pay the owner a guaranteed minimum income every year for as long as the individual lives.
A life annuity is designed specifically to provide the owner with a steady income for their lifetime, ensuring financial security during retirement or in old age.
A) A life annuity.
This option is correct because a life annuity guarantees a minimum income to the owner for the duration of their life. It is a financial product that converts a lump sum into a stream of payments, providing peace of mind through predictable income.
B) An annuity certain.
An annuity certain does not guarantee payments for the lifetime of the individual; rather, it provides payments for a specified period, regardless of whether the individual is alive. Therefore, this option does not fulfill the requirement of lifetime income.
C) A whole life policy.
A whole life policy is a type of insurance that provides coverage for the insured's entire life and includes a cash value component, but it is not designed to pay out guaranteed income annually. Instead, it focuses on providing a death benefit and cash value accumulation.
D) A survivorship policy.
A survivorship policy is a type of life insurance that pays out upon the deaths of two insured individuals, typically used for estate planning. It does not provide any guaranteed income to the owner during their lifetime and thus does not meet the criteria of the question.
Conclusion
A life annuity is the only option that specifically guarantees a minimum income for the owner's lifetime, aligning perfectly with the question's requirements. The other options either focus on fixed periods, provide insurance coverage, or do not offer income guarantees, making them unsuitable choices.