Kristi buys an annuity that pays her husband for 15 years; if he dies, payments continue to their children for the remainder of the period. What type of annuity is this?

• A. Temporary annuity certain
• B. Life annuity
• C. Annuity with refund
• D. Straight life annuity

Answer: (A)

This is a temporary annuity certain (a term annuity) with a 15-year period. It guarantees payments for a fixed 15-year span to the primary recipient, and if the primary recipient dies before the period ends, the remaining installments continue to a designated beneficiary (the children) for the rest of that 15-year term. That fixed-term, survivor-to-beneficiary feature is what defines a term annuity with period certain.

A straight life annuity would stop at the annuitant’s death, with no continuation to heirs. An annuity with refund is a life-based arrangement that guarantees the total refunded amount to a beneficiary, not a strict fixed calendar period for the payments to continue to others.