Archive / Investment Adviser (Level 2) / Life Insurance Products
nism-series-xb-joint-life-annuity-50-percent-spouse-pension[ INVESTMENT ADVISER (LEVEL 2) ]
How does an 'Immediate Joint Life Annuity with 50% Pension to Surviving Spouse' operate upon the demise of the primary annuitant?
[ A ]Payments stop immediately on the primary annuitant's death, leaving the spouse with ₹0.
[ B ]Pays 100% of the full annuity amount while both spouses are alive; upon the death of the primary annuitant, the annuity payout reduces to exactly FIFTY PERCENT (50%) of the original installment, continuing for the remaining lifetime of the surviving spouse.[ CORRECT ]
[ C ]Payments double to 200%.
[ D ]The spouse is sentenced to civil prison.
Takeaway
The correct answer is B: a 50% Joint Life Annuity pays the full annuity while both spouses are alive, and upon the primary annuitant's death, continues paying exactly 50% of the original installment to the surviving spouse for the rest of their life.
Derivation
This variant sits between a single-life annuity (which pays nothing to a survivor) and a 100% joint-life-survivor option (which pays the survivor the full amount) -- the 50% reduction is a deliberate design choice reflecting that a single surviving person's household expenses are typically lower than a couple's combined expenses, while still guaranteeing the survivor a lifelong, if reduced, income stream. Because the insurer's expected payout liability is lower than under a 100% survivor option, this variant is priced with a higher initial per-rupee pension rate than the 100% option, which is the trade-off examiners typically pair with this question.
Why the others fail
A — Payments stop immediately on the primary annuitant's death, leaving the spouse with ₹0.
Directly contradicts the defined feature of joint life annuities, which is continued (reduced) payment to the surviving spouse, not termination.
C — Payments double to 200%.
Nonsensical and unsupported by the product mechanism; annuity payouts follow the contractually agreed reduction schedule, they don't double.
D — The spouse is sentenced to civil prison.
Absurd and legally baseless; there is no imprisonment consequence tied to annuity continuation upon the primary annuitant's death.
Related questions
nism-series-xb-bose-endowment-policy-irr-calculationInvestment Adviser (Level 2)
Finding the Hidden Investment Return in an Endowment Insurance Policynism-series-xb-hlv-versus-needs-based-insurance-comparisonInvestment Adviser (Level 2)
Why Human Life Value Cover Is Always At Least as Large as Needs-Based Covernism-series-xb-charu-income-replacement-hlv-additional-coverInvestment Adviser (Level 2)
Charu's Additional Life Cover Under the Income Replacement Method