Which of these will have the highest monthly payout upon annuitization?

• A. Life with period certain
• B. Joint and survivor
• C. Refund life
• D. Straight life

Answer: (D)

The monthly payout is highest when the contract covers only one life for the duration of that life, with no guarantees or provisions for a second life. Straight life pays as long as the annuitant lives and ends when they die, so the insurer can set a larger monthly amount because there’s no additional risk to fund beyond that single lifetime.

Other options include guarantees or multiple lives, which require reserving funds to cover longer or more complex payout guarantees. Life with period certain continues payments for a minimum period even if the annuitant dies early, reducing the monthly amount. Refund life ensures that if the annuitant dies before the total payments equal the premium, the remainder goes to a beneficiary, which also lowers the periodic payment. Joint and survivor covers two lives, paying as long as either person is alive, which spreads the risk over two lifespans and reduces the monthly amount relative to single-life options. Therefore, the straight life option yields the highest monthly payout.