An annuitant dies during the distribution period. What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made?

• A. life annuity
• B. refund annuity
• C. temporary annuity
• D. installment refund annuity

Answer: (B)

When an annuity includes a guarantee to return any unpaid value to a beneficiary, it’s using a refund feature. If the annuitant dies during the distribution period, a refund option ensures the beneficiary receives the amount that hasn’t yet been paid out—the difference between the annuity’s value and the income already received. This is exactly what a refund annuity provides. The remaining balance can be paid as a lump sum (cash refund) or in installments (installment refund), but the core idea is that the beneficiary gets the remaining value.