When ranking annuity settlement options, which option provides the lowest monthly income?

When ranking annuity settlement options by the income they provide, the straight life annuity option typically results in the lowest monthly income payout. This type of annuity pays the annuitant for their lifetime, with no further benefits payable to beneficiaries after death. Because the payments cease upon death, this option allows the insurance company to retain the risk of longevity, meaning they can offer the highest monthly income for the lifetime of the annuitant.

In contrast, options that include features like a guaranteed period (such as a life with ten years certain), a refund option, or both require additional security for beneficiaries, which effectively lowers the monthly income the annuitant receives. The life with ten years certain guarantees payments for at least ten years, regardless of the annuitant’s lifespan, which increases the assurance for beneficiaries but reduces the monthly income compared to a straight life annuity. Similarly, the life with refund option ensures that beneficiaries receive any remaining funds upon the annuitant's death, also decreasing the monthly income relative to a straight life annuity. Finally, the life with refund and ten years certain option combines these two features, providing the most security for beneficiaries and resulting in an even lower monthly income than the other options.

Therefore, the life with