California Insurance License Exam Practice Test Practice Question
A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments MUST the insurer make?
Correct Answer: B
Rationale: In this scenario, a 10-year certain annuity guarantees payments for a minimum of 10 years, regardless of the annuitant's lifespan. Since the annuitant received payments for 5 years before passing away, there are still 5 years of payments left. Given that payments are made monthly, this translates to 5 years × 12 months/year = 60 remaining payments.
Option A is incorrect, as the insurer is obligated to fulfill the remaining payments. Option C incorrectly doubles the number of payments, misunderstanding the annuity's duration. Option D misrepresents the payment structure; the insurer must continue monthly payments rather than issue a lump sum.
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