Which type of contract is designed to liquidate an estate through recurrent payments?

Which type of contract is designed to liquidate an estate through recurrent payments?

• A. Endowment Contract
• B. Whole Life Insurance
• C. Annuity
• D. Universal Life Insurance

Answer: (C)

An annuity is a financial product that is specifically designed to provide a series of payments over a specified period, often used to liquidate an estate or provide income during retirement. Annuities transform a lump sum of money, such as an inheritance or savings, into regular, periodic payments to the annuitant. This is particularly beneficial for managing finances after the death of an estate holder, as it allows beneficiaries to receive funds consistently instead of in a single, potentially overwhelming distribution. In comparison, an endowment contract combines life insurance with savings aspects, paying out a lump sum at the end of a specified term or upon death, and is not primarily focused on recurring payments. Whole life insurance provides a death benefit and has a cash value component but does not inherently provide regular payments like an annuity. Universal life insurance, while flexible regarding premiums and death benefits, is also primarily a life insurance product and does not focus on providing structured, recurring payments to liquidate an estate. Thus, the annuity is the correct choice as it is fundamentally designed to create a steady stream of income through recurrent payments, effectively addressing the objective of liquidating an estate over time.

An annuity is a financial product that is specifically designed to provide a series of payments over a specified period, often used to liquidate an estate or provide income during retirement. Annuities transform a lump sum of money, such as an inheritance or savings, into regular, periodic payments to the annuitant. This is particularly beneficial for managing finances after the death of an estate holder, as it allows beneficiaries to receive funds consistently instead of in a single, potentially overwhelming distribution.

In comparison, an endowment contract combines life insurance with savings aspects, paying out a lump sum at the end of a specified term or upon death, and is not primarily focused on recurring payments. Whole life insurance provides a death benefit and has a cash value component but does not inherently provide regular payments like an annuity. Universal life insurance, while flexible regarding premiums and death benefits, is also primarily a life insurance product and does not focus on providing structured, recurring payments to liquidate an estate.

Thus, the annuity is the correct choice as it is fundamentally designed to create a steady stream of income through recurrent payments, effectively addressing the objective of liquidating an estate over time.