An annuitant received $12,500 from his $25,000 straight life annuity. He was insured under a $50,000 paid-up whole life policy that named his wife beneficiary. Considering the contracts, how much will the annuitant's spouse receive in benefits?
A. $50,000
B. $62,500
C. $75,000
D. Nothing
Answer (2)
The annuity and life insurance policy are separate contracts.
The spouse is the beneficiary of the $50,000 life insurance policy.
The amount received from the annuity does not affect the life insurance payout.
The spouse will receive 50 , 000 in benefits.
Explanation
Understanding the Problem We are given that an annuitant received $12,500 from his $25,000 straight life annuity. He was also insured under a $50,000 paid-up whole life policy, and his wife is the beneficiary. We need to determine how much the spouse will receive in benefits.
Analyzing the Contracts The key here is to understand that the annuity and the life insurance policy are separate contracts. The amount the annuitant received from the annuity before death does not affect the life insurance policy payout to the spouse. The spouse is the beneficiary of the $50,000 life insurance policy.
Determining the Benefit Therefore, the spouse will receive $50,000 from the life insurance policy.
Examples
Life insurance policies are designed to provide financial security to beneficiaries upon the death of the insured. Understanding how these policies work is crucial for financial planning. For example, if a person has a $50,000 life insurance policy and has paid all the premiums, the beneficiary will receive $50,000 upon the death of the insured, regardless of any other financial arrangements the insured may have had, such as annuities or debts. This ensures that the beneficiary has a financial cushion to help with expenses and maintain their standard of living.
The spouse will receive $50,000 from the life insurance policy, as the annuity and life insurance policy are separate contracts. The annuity payout does not affect the amount of the life insurance benefit. Therefore, the correct option is A. $50,000.
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