Question

An insured bought an annuity for $80,000. The insured died after receiving only $50,000. The balance is paid in a lump sum to the insured's beneficiary. This is known as the?

A) Installment Refund option.
B) Life Income option.
C) Cash Refund option.
D) Survivor option.

Answer 1

The option where an insured's beneficiary receives a lump-sum payment of the remaining balance of an annuity after the insured's death is known as the Cash Refund option. The correct option c.

Step-by-step explanation:

In the described scenario, where the insured purchased an annuity for $80,000 and died after receiving only $50,000, with the balance being paid in a lump sum to the insured's beneficiary, this is known as the Cash Refund option.

This option ensures that if the insured dies before fully recovering the investment in the annuity, the remaining amount will be refunded, often to a beneficiary. Cash-value (whole) life insurance, on the other hand, combines a death benefit with a savings account (cash value) that the insured can use during their lifetime.

Over time, this cash value accumulates and can be borrowed against or withdrawn and used for various financial needs.