What occurs if an annuitant dies before their total investment has been collected in a refund life annuity?

In a refund life annuity, if the annuitant passes away before they have received back their total investment amount, the remaining balance is paid to the designated beneficiary. This feature ensures that the annuitant's initial investment is not lost upon their death, providing a financial benefit to their beneficiaries. The refund provision protects the annuitant's assets by guaranteeing that the total amount contributed will be returned, either through monthly payments or in a lump sum, depending on the structure of the annuity. This inherent safeguard is a significant reason individuals may choose a refund life annuity over other types, as it offers peace of mind regarding their investment.

Other options do not accurately represent the function of a refund life annuity. For instance, the insurance company retaining the remaining balance would undermine the purpose of the annuity, while monthly refunds typically do not apply once the annuitant has died, and transferring the annuity to the state would not follow standard practices regarding beneficiary designations.