LIFE ANNUITIES (STRAIGHT LIFE ANNUITIES)
This is the most common type of annuity. The simple “Straight Life Annuity” provides for guaranteed periodic payments that terminate upon the death of the annuitant. Once the annuitant dies, the contract is fulfilled and no payments are made. This type of annuity does not guarantee that the annuitant will receive payments equal to the amount paid as premiums on the contract. If the annuitant lives a long time, they will recover more than all of the premiums they have paid; if they die soon after annuitization, the insurance company will only pay the benefits up until the time of death.
In the event the annuitant dies during the accumulation period (i.e. the time that payments are being made on the annuity, but prior to annuitization) proceeds will revert to the beneficiary, or if none is named, to the estate. Because this limits potential payouts, it will provide a higher return than other plans.
The Straight Life Annuity provides the maximum income per dollar of outlay.
LIFE INCOME WITH PERIOD CERTAIN
The Life Income with Period Certain guarantees that annuity payments to a beneficiary will be made for a specific number of years, even if the annuitant dies before the end of this period. Payments to the annuitant will continue as long as he or she lives.
LIFE INCOME WITH REFUND ANNUITY
The Life Income with Refund type of Annuity states that in event of the annuitant’s death, the company will pay an amount at least equal to the total dollars paid in as premiums. The company will continue to pay the guaranteed amount of monthly income for as long as the annuitant lives.
There are two types of this annuity:
Cash Refund: The Company agrees that if the annuitant dies, it will refund in cash the difference between the income that annuitant received and the amount that was paid in premiums plus interest earned.
Installment Refund: The Company agrees to continue to make payments to the beneficiary until the total of the payments made to the annuitant and to the beneficiary equals the amount the owner paid for the annuity plus the interest earned. The longer the payout is to continue after the annuitant’s death, the smaller will be the periodic payments.
? Annuities with refund options pay annuitants lower amounts of income than do comparable contracts without them. The refund option represents an extra benefit for the contract owner and an extra cost for the company.
TEMPORARY LIFE ANNUITY
The Temporary Life Annuity is a “combination” plan. Annuity payments will be made until either (a) the end of a pre-determined number of years, or (b) until the death of the annuitant, whichever comes first.
JOINT AND SURVIVOR ANNUITIES
Under this arrangement, two people are insured, usually husband and wife. Beginning on the date set in the contract, payments are paid to the annuitants. Payments are guaranteed to continue to the surviving spouse upon the other spouse’s death. Depending on the terms, the continuing payments will either be in the same amount as when both annuitants were alive, or be reduced. Obviously, the premiums are higher than those for life income annuities are since the likelihood of a long annuity payment period is greater when more than one life is covered.
