Maryland Life and Health Insurance License Practice Exam

What annuity option distributes income to dependents after the annuitant's death for the remainder of a specified period?

1. Life only

2. Contingent income

3. Joint life

4. Term certain

The correct answer is: Term certain

The correct choice refers to an annuity option that guarantees income to dependents or beneficiaries for a set period of time, even after the annuitant has passed away. This type of distribution is typically structured so that if the annuitant dies before the end of this specified period, the remaining payments continue to be made to the designated beneficiaries. A “term certain” annuity provides payments for a predetermined number of years, irrespective of the annuitant’s lifespan. This arrangement ensures that the recipients—who could be dependents, family members, or other beneficiaries—will receive the income for the duration of the specified term, thereby providing financial security for that time frame. In contrast, other options differ in focus and structure. "Life only" options terminate upon the death of the annuitant, meaning there would be no further income for dependents after their death. "Contingent income" typically refers to payments that start upon the occurrence of a specified event but does not imply a guaranteed payment schedule for dependents after the annuitant's death. "Joint life" options provide payments for as long as either of two designated individuals is alive, but do not typically address beneficiary income after both parties have passed away. Thus, the term