Annuitant

Payments continue to the beneficiary for the remaining 7 years of the period certain — A life with period certain option guarantees payments for a minimum number of years even if the annuitant dies early. Here, the 10-year period certain means the contract must pay for 10 years in total; since only 3 years of payments were made, the beneficiary receives the remaining 7 years of payments. After the period-certain guarantee ends, no further payments are owed if the annuitant is deceased. The option thus guarantees a minimum return while still providing lifetime income.

National insurance concept

By pooling mortality experience so that payments to long-lived annuitants are funded in part by annuitants who die earlier — Like life insurance, an annuity relies on the law of large numbers and a mortality table. Because some annuitants die early and stop receiving payments, the insurer has funds to keep paying those who live longer — this is sometimes called the survivor's credit. The more homogeneous and numerous the group, the more accurately the insurer can predict the average payout period and price each contract accordingly.

National insurance concept