In an annuitant driven deferred annuity contract, what occurs if the annuitant dies before annuitization but the owner is alive?

In an annuitant-driven deferred annuity contract, if the annuitant passes away before the annuity has been converted into an income stream through annuitization, the contract typically provides for a death benefit payment. This means that the contract terminates upon the death of the annuitant, but a death benefit is paid out to the designated beneficiary or possibly to the contract owner if there is no named beneficiary.

This provision is essential because it ensures that the funds accumulated in the annuity are not lost and provide financial protection for beneficiaries in the event of the annuitant’s untimely death. It allows for the transfer of the investment amount, ensuring that the beneficiaries receive the value of the contract, which reflects the accrued value or a guaranteed minimum, if applicable.

In contrast, the other options would imply that the contract either remains in place without addressing the consequences of the annuitant's death or that it continues on an unchanged basis, neither of which accurately reflects the typical operation of an annuity upon the annuitant's death.