Which statement regarding the annuitant is correct?

• A. The annuitant's life expectancy determines the annuity payments
• B. The policy's issue age determines the payments
• C. The insurer's investment gains determine the payments
• D. The beneficiary's income determines payments

Answer: (A)

Payments from an annuity are determined by the annuitant’s life expectancy. In a life-contingent arrangement, the contract promises to pay as long as the annuitant is alive, so how long those payments continue and how much is paid depend on the expected lifespan of the person receiving them. The higher the expected longevity, the longer the payment stream can be, and vice versa.

The issue age is used for pricing and underwriting, not the ongoing payment amounts. Investment gains of the insurer don’t set the guaranteed payment stream in standard fixed annuities. And the beneficiary’s income doesn’t determine payments—payments are based on the annuitant’s life (and the chosen payout option), with death-benefit terms only altering who receives funds under certain conditions.