Final answer:
The annuity settlement option that pays an annuitant for life and stops upon their death is a life annuity or straight life annuity. This provides reliable retirement income without a death benefit or cash value like whole life insurance policies. Pensions operate similarly to annuities, funded by employers to provide retirement income.
Step-by-step explanation:
The form of the annuity settlement option that provides payments to an annuitant for the duration of the annuitant's life and ceases upon their death is commonly known as a life annuity or straight life annuity. This means that the annuity payments are guaranteed for the lifetime of the annuitant, offering a predictable and reliable income stream during retirement. Unlike cash-value life insurance, which has a death benefit and a cash value that can be used by the policyholder during their lifetime, a life annuity does not typically offer a death benefit or residual value to beneficiaries upon the annuitant's passing.
Similarly, pensions can be likened to annuities in the sense that they provide fixed annual payments. These pensions are funded by a pension fund accumulated by employers over time, which is then used to provide retirement income to their retired employees.