Which option describes a refund option?

Which option describes a refund option?

• A. It pays a fixed amount for life
• B. It pays to the named beneficiary after death with no remaining balance
• C. It pays for life with no beneficiary
• D. It pays to the longer of life or until the original principal is paid, with any remaining balance paid as a lump sum to the named beneficiary at the annuitant's death

Answer: (D)

Refund options guarantee that the original premium is recovered through ongoing payments, with any unrecovered portion paid to a named beneficiary if the annuitant dies early. The described option provides lifetime payments but continues until the principal is fully paid, and any remaining balance is then paid to the beneficiary as a lump sum at death. This combination—ensuring principal recovery and a beneficiary payout if death occurs before full recovery—defines a refund option. The other choices describe payout arrangements that do not include returning the principal to a beneficiary or lack a beneficiary provision, so they do not fit the concept of a refund option.

Refund options guarantee that the original premium is recovered through ongoing payments, with any unrecovered portion paid to a named beneficiary if the annuitant dies early. The described option provides lifetime payments but continues until the principal is fully paid, and any remaining balance is then paid to the beneficiary as a lump sum at death. This combination—ensuring principal recovery and a beneficiary payout if death occurs before full recovery—defines a refund option. The other choices describe payout arrangements that do not include returning the principal to a beneficiary or lack a beneficiary provision, so they do not fit the concept of a refund option.