Question

An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity ( a fixed sum of money paid to someone each year, typically for the rest of their life.) value and the income payments already made?

Answer 1

A cash refund annuity ensures that if the annuitant dies before the investment is recouped, the remaining balance is returned to a beneficiary.

Step-by-step explanation:

The type of annuity that will return the difference between the annuity value and the income payments already made, in the event an annuitant dies during the distribution period, is called a cash refund annuity.

Retirees who rely on a fixed income, such as pensions known as defined benefits plans, face a loss of buying power due to inflation over time. However, with a cash refund annuity, if the annuitant passes away before recouping the investment, the remaining money is refunded to a beneficiary, ensuring that the full value of the annuity is paid out.