PSI Life Exam Practice Test

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Upon annuitization, which of the following will have the highest monthly payout?

Straight Life
Joint Life
Life with Period Certain
Term Life

The correct answer is: Straight Life

The option that leads to the highest monthly payout upon annuitization is the Straight Life option. This type of annuity provides payments to the annuitant for their entire lifetime, with no additional provisions for beneficiaries after their death. Because the payments are based solely on the life expectancy of the annuitant and do not need to account for the potential continuation of payments to a second person or any guaranteed period, the monthly payout is maximized. In contrast, Joint Life pay out options, while beneficial for couples, will pay less per month because the payout must accommodate for both lives, which can significantly extend the duration of payments. Life with Period Certain guarantees payments for a defined period, meaning that the total amount is distributed over a shorter time frame, potentially lowering each payment. Term Life, while a form of insurance, does not offer a payout in the same manner as the other options since it only pays a benefit upon death within a specified term and does not provide monthly income during the annuitization phase. Therefore, the Straight Life annuity is designed to offer the highest monthly payment because it is a straightforward contract focused solely on the individual receiving the annuity.