In Life Income (Pure or Straight) annuities, what factors determine the amount of each payment?

In Life Income (Pure or Straight) annuities, the amount of each payment is primarily determined by the age and gender of the recipient. This is because these factors influence the life expectancy of the individual, which is central to how annuities are structured.

Annuities are intended to provide regular income payments for the lifetime of the annuitant. Insurance companies use actuarial tables, which take into account age, gender, health status, and other demographic factors to predict the average lifespan of policyholders. For instance, a younger individual is statistically expected to receive payments over a longer period compared to an older individual. Additionally, gender plays a role in life expectancy data, with women generally living longer than men. Therefore, the combination of age and gender directly influences how much the insurer is willing to pay out in each annuity installment, as it calculates the total expected payments over the recipient's anticipated lifetime.

Other options, such as the total investment amount, current inflation rate, and length of the payment period, while relevant to certain aspects of annuities, do not determine the payment amounts for Life Income annuities, which are specifically designed to convert the investment into a guaranteed income stream based on lifespan probabilities.