Which annuity provides the largest possible monthly payment to an individual annuitant?

Which annuity provides the largest possible monthly payment to an individual annuitant?

• A. Deferred Annuity
• B. Fixed Indexed Annuity
• C. Variable Annuity
• D. Straight Life Annuity

Answer: (D)

The option of a Straight Life Annuity provides the largest possible monthly payment to an individual annuitant because it is designed to pay out benefits for the annuitant's lifetime without any additional guarantees. This means that the payments are maximized based on the life expectancy of the individual receiving the annuity. With a Straight Life Annuity, the insurer does not need to account for the possibility of making payments after the annuitant's death, allowing them to provide a higher monthly benefit compared to other annuity types that may have features such as a guaranteed period of payment or survivor benefits. This structure focuses solely on the longevity risk of the annuitant, thereby maximizing the monthly payout for the duration of the annuitant's life. In contrast, other annuity options often include additional benefits or features, such as a guaranteed term or varying investment returns, which can reduce the amount of the monthly payment. For instance, deferred annuities typically require the funds to be accumulated before payouts begin, while fixed indexed and variable annuities may tie payments to market performance or include other riders that can affect the payout amount.

The option of a Straight Life Annuity provides the largest possible monthly payment to an individual annuitant because it is designed to pay out benefits for the annuitant's lifetime without any additional guarantees. This means that the payments are maximized based on the life expectancy of the individual receiving the annuity.

With a Straight Life Annuity, the insurer does not need to account for the possibility of making payments after the annuitant's death, allowing them to provide a higher monthly benefit compared to other annuity types that may have features such as a guaranteed period of payment or survivor benefits. This structure focuses solely on the longevity risk of the annuitant, thereby maximizing the monthly payout for the duration of the annuitant's life.

In contrast, other annuity options often include additional benefits or features, such as a guaranteed term or varying investment returns, which can reduce the amount of the monthly payment. For instance, deferred annuities typically require the funds to be accumulated before payouts begin, while fixed indexed and variable annuities may tie payments to market performance or include other riders that can affect the payout amount.