Which contract promises to pay the owner a guaranteed minimum income every year for as long as the individual lives

Rationale

A life annuity.

A life annuity ensures a guaranteed minimum income for the individual throughout their lifetime, offering financial security by providing regular payments that continue as long as the annuitant lives.

B (An annuity certain.) YOUR ANSWER

An annuity certain guarantees payments for a specified period, regardless of whether the annuitant is alive or deceased. Unlike a life annuity, the duration of payments in an annuity certain is fixed and does not depend on the annuitant's lifespan.

C (A whole life policy.) YOUR ANSWER

A whole life policy is a type of permanent life insurance that provides coverage for the insured's entire life. While it offers a death benefit, it does not guarantee a minimum income for the policyholder during their lifetime.

D (A survivorship policy.) YOUR ANSWER

A survivorship policy, also known as a second-to-die policy, insures two individuals and pays out the death benefit only after both individuals have passed away. It does not provide a guaranteed minimum income to the surviving individual during their lifetime.

Conclusion

In the context of ensuring a steady income stream for an individual as long as they live, a life annuity is the appropriate choice. It offers financial stability and peace of mind by providing regular payments that continue regardless of how long the annuitant survives. This specific feature distinguishes a life annuity from other financial instruments like annuity certains, whole life policies, and survivorship policies, each designed for different purposes within the realm of insurance and financial planning.

Which contract promises to pay the owner a guaranteed minimum income every year for as long as the individual lives

A life annuity.

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