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Imogene LewisBroderick
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Imogene LewisBroderick   My Press Releases

Annuity Payment Options

Published on 1/21/2014
For additional information  Click Here

ANNUITY PAYMENT OPTIONS

 It is extremely important that the professional that sits with an annuity client ask all the pertinent questions, of the client, in order to offer the best payment option.

The phrase Annuity Payment Options is the agreement for the payments between the parties involved that specifies how the annuity funds will be paid during the annuitization period.

LIFE CONTINGENCY OPTIONS

PURE LIFE vs. LIFE WITH GUARANTEED MINIMUM

PURE LIFE

A Pure Life Annuity also referred to as Life-only or Straight Life Annuity pays a specific, predetermined amount as long as the annuitant remains alive, but ceases payment at the annuitant’s death. This is true regardless how soon in the annuitization period the annuitant dies. Because the possibility exist that the annuitant could die shortly after the annuitization of a Pure Life Annuity begins its pay-out, it makes perfect sense that this type of annuity provides the highest monthly benefits for an individual annuitant.

While the annuity payments are guaranteed under this option, there is no guarantee that the proceeds will be paid out in full.

 

LIFE WITH GUARANTEED MINIMUM

Under the Life with Guaranteed Minimum or Refund Life settlement option, unlike the aforementioned Pure Life or Straight Life Annuity, if the annuitant dies prior to the principal amount being fully paid out, the remaining principal amount must be refunded to the annuitant’s beneficiary. The bottom line is, it guarantees that the full principal amount must be paid out.

GUARANTEED/REFUND LIFE PAYMENT OPTIONS

There are two types of payment types to choose from for the Refund Life Option. Those options are 1) Cash Refund, which provides a lump-sum payment to the beneficiary upon the death of the annuitant or 2) Installment Refund – like the name implies, this payment option provides the beneficiary with guaranteed installment until the full principal amount is depleted.

  

LIFE WITH PERIOD CERTAIN

Life WITH period certain is another life contingency payment option that is based on the life of the annuitant, but could see payment going to beneficiaries.  The annuity payment under the Life with Period Certain Option must be guaranteed for 1) the lifetime of the annuitant and 2) a specified period of time that could run far beyond the annuitant’s life.

EXAMPLE

Life Income with a 30-year period certain option would provide the annuitant’s income for his/her entire life, but if the annuitant dies shortly after the payments starts, say five years in, the payments would be continued to a beneficiary or beneficiaries for the remaining years, until the end of the 30 years period.

SINGLE LIFE vs. MULTIPLE LIFE

A single life annuity covers one life. Payments during the accumulation period can be made on a periodic or lump-sum basis and accumulates until the contract annuitizes. The single life contract provides the highest monthly payment.

A multiple life annuity covers two or more lives and therefore has lower monthly payout.

JOINT LIFE

A joint life is a payout arrangement that makes payments to two or more annuitants until the first death and the payments cease.

JOINT AND SURVIVOR

The joint and survivor life income is clearly a modification to the life income option that guarantees income to two annuitants that neither of them can outlive. The amount that the surviving spouse receives could be the same amount that the first spouse was receiving but could be lessened. The joint and survivor option is widely used by couples in retirement. Similar to the life income option, there is no guarantee that all the cash proceeds will be paid out if both beneficiaries die shortly after the annuitization period starts.

ANNUITIES CERTAIN

Annuity certain are short-term annuities that limits the amount paid to a certain fixed period or until a fixed amount is distributed.

FIXED PERIOD INSTALLMENTS

With a fixed-period installment, the annuitant determines the time period for benefit payments and the insurer determines how much will be paid per period, based on the account value and the future earnings.

FIXED AMOUNT INSTALLMENTS

With a fixed-amount installment, the annuitant determines how much each payment will be and the insurer determines many payments will be made based on the account value and future earnings projections.

 

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