Practice Quiz

Health and Life Insurance

Category - Annuities & Policies

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If Jack and Jill both have $500,000 to fund the payment of a lifetime annuity payment, which of the following best explains differences that may occur in the determination of payouts?
  1. Jack will receive lower payouts as he is 5 years older than Jill.
  2. Jill will receive higher payouts as she is 5 years older than Jack
  3. Jack will receive higher payouts as he is more likely to die before Jill
  4. Jill will receive higher payouts as she is more likely to die before Jack
Explanation
Answer: C - Jack will receive higher payouts as he is more likely to die before Jill. Part of the annuity process involves using age as a determination for payouts of annuities. Because a man’s life expectancy is shorter than a woman’s life expectancy, a man’s policy will likely pay out higher. This determination has slowly been changing where some states use a unisex determination for equality.
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