Question 33

A life income annuity provides for the systematic liquidation of a principal sum over an individual's lifetime.

A life income annuity is designed to provide regular payments to an individual for the duration of their life, effectively liquidating the principal sum over time.

A) A life income annuity

This option is correct because a life income annuity specifically guarantees payments for the lifetime of the annuitant, ensuring that the principal sum is systematically liquidated through regular disbursements until death.

B) An immediate annuity certain

This option is incorrect as an immediate annuity certain provides payments for a specified period, regardless of the individual's lifespan. Therefore, it does not ensure the systematic liquidation of the principal sum over an individual's lifetime.

C) A survivorship life insurance policy

This option is incorrect because a survivorship life insurance policy does not liquidate a principal sum; instead, it pays a death benefit upon the passing of the insured individuals. It does not provide regular payments over the individual's lifetime.

D) An installment for a fixed amount

This option is also incorrect. An installment for a fixed amount refers to a payment plan that may not be tied to the individual's lifespan and does not guarantee the liquidation of the principal sum over time as a life income annuity does.

Conclusion

The life income annuity is the only option that guarantees systematic payments for the duration of an individual's life, ensuring that the principal sum is properly liquidated over that period. Other options either provide fixed payments for specific terms or are not designed for income distribution over a lifetime, thereby failing to meet the criteria established in the question.