Which of the following statements concerning an individual straight life annuity is accurate?

• A. Payments increase automatically each year to adjust for inflation.
• B. Payments are guaranteed to beneficiaries after the annuitant's death.
• C. Payments continue for the annuitant's lifetime and cease upon their death.
• D. The annuitant can withdraw the remaining principal at any time.

Answer: (C)

Verified step by step guidance

1. Understand the concept of a straight life annuity: A straight life annuity is a financial product that provides periodic payments to the annuitant for their lifetime, ceasing upon their death. It does not include additional features like inflation adjustments or guarantees to beneficiaries.
2. Analyze the first statement: 'Payments increase automatically each year to adjust for inflation.' This is incorrect because a straight life annuity does not include automatic inflation adjustments unless explicitly stated in the contract.
3. Evaluate the second statement: 'Payments are guaranteed to beneficiaries after the annuitant's death.' This is incorrect because a straight life annuity ceases payments upon the annuitant's death and does not provide benefits to beneficiaries.
4. Assess the third statement: 'Payments continue for the annuitant's lifetime and cease upon their death.' This is accurate because it aligns with the definition of a straight life annuity, which provides payments for the annuitant's lifetime only.
5. Review the fourth statement: 'The annuitant can withdraw the remaining principal at any time.' This is incorrect because a straight life annuity does not allow the annuitant to withdraw the principal; payments are fixed and based on the annuity terms.