What is paid to designated beneficiaries if an annuitant dies before receiving the total purchase price of an annuity?

In the context of annuities, a cash refund annuity ensures that if the annuitant dies before receiving an amount equal to their total investment in the annuity, the remaining funds are paid out to the designated beneficiaries. This feature is designed to protect the beneficiaries by ensuring that they receive the difference between the total contributions made by the annuitant and the amount already paid out in the form of annuity payments.

This type of arrangement is particularly important for individuals who want to ensure that their beneficiaries are financially supported in the event of their untimely death, providing them with peace of mind knowing that their investment will not be lost. The cash refund annuity effectively safeguards against the risk of the annuitant not living long enough to recoup their total purchase price.

Other terms mentioned in the answer choices, like beneficiary payout, life expectancy payout, and excess payment, do not accurately depict the mechanism provided by the cash refund feature of an annuity. These options may refer to different financial concepts but do not specifically describe the scenario where beneficiaries receive a refund of the unpaid balance upon the annuitant’s death before full payment has been received. Therefore, the cash refund annuity is the correct answer, as it directly addresses the situation described