An annuity promises that if the annuitant dies before receiving all scheduled payments, which of the following typically occurs?

• A. All remaining payments are forfeited to the issuing company.
• B. The remaining payments may be paid to a designated beneficiary.
• C. The annuitant's estate receives a lump sum equal to the total contract value.
• D. The annuity contract is automatically converted into a life insurance policy.

Answer: (B)

Verified step by step guidance

1. Understand the concept of an annuity: An annuity is a financial product that provides a series of payments to an individual (the annuitant) over a specified period, often for the remainder of their life. It is typically used for retirement income planning.
2. Identify the key feature of the annuity in question: The problem mentions what happens to the remaining payments if the annuitant dies before receiving all scheduled payments. This is related to the terms of the annuity contract, specifically the death benefit provision.
3. Review the options provided: Analyze each option to determine which aligns with typical annuity contract terms. For example, forfeiting payments to the issuing company is uncommon unless explicitly stated in the contract. Paying the remaining payments to a designated beneficiary is a standard feature in many annuity contracts.
4. Clarify the role of the designated beneficiary: In most annuity contracts, if the annuitant dies, the remaining payments or a lump sum may be paid to a designated beneficiary. This ensures that the value of the annuity is not lost upon the annuitant's death.
5. Conclude based on typical annuity terms: The correct answer is that the remaining payments may be paid to a designated beneficiary, as this is a common feature in annuity contracts to protect the financial interests of the annuitant's heirs or beneficiaries.