Which settlement option pays a stated amount to an annuitant for a specified period or for life?

• A. Lump-sum option
• B. Annuity option
• C. Installment refund option
• D. Interest-only option

Answer: (B)

Verified step by step guidance

1. Understand the concept of settlement options: Settlement options refer to the ways in which the proceeds from a financial instrument, such as an insurance policy or annuity, can be distributed to the beneficiary or annuitant.
2. Define the annuity option: The annuity option is a settlement method where a stated amount is paid periodically to the annuitant either for a specified period or for the remainder of their life.
3. Compare the annuity option with other options: For example, the lump-sum option pays the entire amount at once, the installment refund option provides periodic payments until the principal is refunded, and the interest-only option pays only the interest earned on the principal.
4. Identify the key feature of the annuity option: The defining characteristic of the annuity option is its ability to provide a steady stream of income over time, which can be tailored to last for a specific period or for the lifetime of the annuitant.
5. Conclude that the annuity option is the correct answer based on its description and purpose, as it aligns with the requirement of paying a stated amount for a specified period or for life.