Tennessee Insurance Practice Exam

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What is true regarding an Individual Straight Life annuity?

Payments are made for a set number of years
Payments may stop upon the annuitant's death
Payments are made to an annuitant for life
Payments are contingent on investment performance

The correct answer is: Payments are made to an annuitant for life

An Individual Straight Life annuity guarantees that payments are made to the annuitant for the duration of their life. This type of annuity provides a stable income stream and is designed to ensure that the annuitant does not outlive their resources, which is a significant consideration for retirees or individuals looking for long-term financial security. With this arrangement, the payments will continue as long as the annuitant is alive, but they will stop upon the annuitant's death. This aspect makes it distinct from other annuity options which may offer payments for a set number of years or include potential investment performance as a factor in determining payouts. Hence, the primary focus of the Individual Straight Life annuity is on providing lifelong income rather than being contingent on external factors or having a defined payment period.