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

60 payments.

In 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 equals 60 monthly payments.

A (None.) YOUR ANSWER

This choice is incorrect because the insurer is required to make payments to the beneficiary in the event of the annuitant's death before the end of the guaranteed period. Since the annuitant received payments for only 5 years, there are still 5 years of payments remaining.

B (60 payments.) CORRECT

This is the correct answer. The annuitant has received monthly payments for 5 years, which totals 60 payments. Given that the annuity guarantees payments for a full 10 years, the insurer must fulfill the remaining 60 payments to the beneficiary after the annuitant's death.

C (120 payments.) YOUR ANSWER

This option is incorrect because it misinterprets the duration of the annuity. The annuity is structured to provide payments for a total of 10 years, or 120 payments in total. However, since 60 payments have already been made, only the remaining 60 payments must be made.

D (One lump sum payment.) YOUR ANSWER

This choice is incorrect as well. The terms of the annuity require continuation of monthly payments rather than a single lump sum payment. The structure of the installment refund ensures that beneficiaries receive the remaining payments in monthly installments for the duration left in the guaranteed period.

Conclusion

In summary, a 10-year certain annuity guarantees that if the annuitant passes away, the insurer must continue making monthly payments to the beneficiary until the end of the guaranteed term. Since the annuitant received payments for 5 years, the insurer is obligated to make the remaining 60 payments over the next 5 years, thereby fulfilling the contractual terms of the annuity.

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?

60 payments.

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