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?

Rationale

The insurer must make 60 remaining payments.

Since the annuity is a 10-year certain annuity with an installment refund, if the annuitant dies after receiving payments for 5 years, the insurer is obligated to continue making payments for the remaining 5 years, which totals 60 monthly payments.

A (None.) YOUR ANSWER

This option is incorrect because the insurer has a contractual obligation to continue payments until the end of the 10-year period. Since the annuitant received payments for only 5 years, the insurer must fulfill the remaining payment obligation.

B (60 payments.) CORRECT

This is the correct answer as it reflects the remaining balance of the 10-year annuity. With 5 years already paid, the insurer is required to make the remaining 5 years' worth of monthly payments, totaling 60 payments.

C (120 payments.) YOUR ANSWER

This choice is incorrect because it misinterprets the terms of the annuity. The total number of payments for a 10-year annuity is 120, but since the annuitant only lived for 5 years and received 60 payments, the insurer only owes the remaining 60 payments.

D (One lump sum payment.) YOUR ANSWER

This option is also incorrect. The structure of a certain annuity with an installment refund requires the insurer to continue making monthly payments rather than disbursing a single lump sum. Thus, the insurer is obligated to continue the monthly payments rather than changing the payment method.

Conclusion

In a 10-year certain annuity with an installment refund, the obligation of the insurer is to make payments until the end of the specified term. After the annuitant's death following 5 years of payments, the insurer must continue to pay the remaining 60 monthly payments, fulfilling the terms of the contract and ensuring that the total payment obligation is met.

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?

The insurer must make 60 remaining payments.

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