PSI Life Exam Practice Test

What is the primary feature of a life income settlement option?

1. It provides a lump sum to beneficiaries

2. It guarantees payments for the lifetime of the annuitant

3. It allows withdrawals at any time

4. It offers variable payment amounts

The correct answer is: It guarantees payments for the lifetime of the annuitant

The primary feature of a life income settlement option is that it guarantees payments for the lifetime of the annuitant. This means that once the settlement option is chosen, the annuitant will receive regular payments that continue for as long as they live, providing financial security and a steady income stream. This is particularly beneficial for individuals who may be concerned about outliving their savings, as it ensures they will have a consistent source of income despite the duration of their life. In contrast, the other options do not align with the core characteristics of a life income settlement option. A lump sum payment to beneficiaries represents a different type of financial settlement, typically seen in a death benefit scenario rather than a life income option. Allowing withdrawals at any time does not typically apply, as life income options are designed to produce stable, lifetime income without the flexibility for immediate access to cash. Lastly, while some annuities might offer variable payment amounts based on investment performance or interest rates, the defining aspect of a life income settlement is its focus on providing fixed payments for the lifetime of the annuitant, rather than variability.