PSI Ohio Insurance Practice Exam

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Study for the PSI Ohio Insurance Exam. Utilize flashcards and multiple choice questions, with hints and explanations for each question. Prepare confidently for your exam!

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Which of the following statements regarding a pure life annuity payout option is correct?

This option provides the highest monthly income.
This option provides equal monthly payments over a specified term.
This option guarantees payments for a minimum period.
This option pays a lump sum at retirement.

The correct answer is: This option provides the highest monthly income.

A pure life annuity payout option is designed to provide income for the lifetime of the annuitant, which means it will continue to make payments as long as the individual is alive. Because the payments are based solely on the individual's life expectancy without any additional guarantees or specified terms, this option tends to offer the highest monthly income compared to other payout options that may include features such as guaranteed periods or return of principal considerations. In contrast, other options like those that guarantee payments for a minimum period or that provide equal monthly payments over a specified term tend to lower the monthly income because they build in additional security for the beneficiary or predetermined timelines for payouts. Similarly, a lump sum payment at retirement would provide a single, upfront amount instead of a series of regular monthly payouts, which is fundamentally different from what a pure life annuity offers. Thus, choosing a pure life annuity effectively maximizes monthly income as it focuses solely on the income needs of the annuitant for their lifetime.