South Carolina Insurance Practice Exam

If the annuitant dies before the annuity start date, what happens to the premiums paid?

1. The premiums are lost

2. The premiums plus interest are refunded to the beneficiary

3. The premiums are returned with a penalty

4. The premiums are converted to a reduced benefit

The correct answer is: The premiums plus interest are refunded to the beneficiary

If the annuitant dies before the start date of the annuity, the typical provision in most annuity contracts is to refund the premiums paid, often along with any interest accrued, to the designated beneficiary. This ensures that the funds that were meant to provide future income or financial security for the annuitant are not lost, but rather passed on to the benefactor or individual designated to receive those funds. The refund of both premiums and interest serves to protect the investment made into the annuity and provides some financial reassurance to the beneficiaries in case the annuitant does not live to see the benefits of the annuity. This is why the option indicating that the premiums plus interest are refunded to the beneficiary stands out as the correct choice.