What term describes a contract that provides income for life?

What term describes a contract that provides income for life?

• A. Bond
• B. Pension
• C. Annuity
• D. Mortgage

Answer: (C)

Annuities are contracts with an insurance company that convert a premium into a guaranteed stream of payments for life. You pay upfront (or over time), and in return you receive regular payments that continue for as long as you live, often with options like guarantees or survivor benefits. This lifetime-income feature is what makes an annuity the right term. A bond, by contrast, is a debt instrument that pays interest and returns principal at maturity. A pension is a retirement plan that provides income, typically from an employer, not a single contract focused on lifetime payments. A mortgage is a loan used to buy real estate with payments made to the lender.

Annuities are contracts with an insurance company that convert a premium into a guaranteed stream of payments for life. You pay upfront (or over time), and in return you receive regular payments that continue for as long as you live, often with options like guarantees or survivor benefits. This lifetime-income feature is what makes an annuity the right term.

A bond, by contrast, is a debt instrument that pays interest and returns principal at maturity. A pension is a retirement plan that provides income, typically from an employer, not a single contract focused on lifetime payments. A mortgage is a loan used to buy real estate with payments made to the lender.