Which of the following best describes a pure life annuity?

• A. An annuity that guarantees payments for a fixed period, regardless of whether the annuitant is alive.
• B. An annuity that pays a lump sum at the end of the contract term.
• C. An annuity that pays periodic amounts to the annuitant for as long as they live, with no payments to beneficiaries after death.
• D. An annuity that allows the annuitant to withdraw any amount at any time.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a pure life annuity. A pure life annuity is a financial product that provides periodic payments to the annuitant for their lifetime. Payments cease upon the death of the annuitant, and no further payments are made to beneficiaries.
2. Step 2: Analyze the options provided in the problem. Each option describes a different type of annuity or payment structure. Compare these descriptions to the definition of a pure life annuity.
3. Step 3: Eliminate options that do not align with the definition of a pure life annuity. For example, an annuity that guarantees payments for a fixed period or allows lump-sum withdrawals does not match the characteristics of a pure life annuity.
4. Step 4: Identify the option that matches the definition of a pure life annuity. Look for the description that specifies periodic payments for the lifetime of the annuitant with no payments to beneficiaries after death.
5. Step 5: Confirm your understanding by reviewing the key features of a pure life annuity: lifetime payments, cessation of payments upon death, and no provision for beneficiaries.