Jan 24 2012
Fundamental Things To Understand About Income Annuities
An income annuity is offered by an insurance company, and basically it is an income for a lifetime or a selected amount of time to the person who owns the annuity policy. There is nothing more simple than an income annuity, but people have very different needs, therefore insurance companies offer a wide range of annuities. This article presents the most common kinds of annuity.
Lifetime annuity is the most simple product. This means that the owner of the annuity deposits an amount of money, and in return, the insurance company will pay him a lifetime income based on that amount. This is the preferred choice of those who are concerned with their income. People who choose this don’t want to give to anyone an income or a lump sum payment after their death.
Annuity certain, or income annuity for a fixed period is exactly what its name suggests: it pays for a fixed period one selects. As all the payments are made, the income will cease to exist. If the beneficiary dies before all payments are paid, the remaining amount will be sent to someone the person selected by the beneficiary. This is best for those who want to pay a mortgage.
A cash refund annuity means that if the owner dies, the deposit will be refunded. For example if someone decides to purchase a $500,000 annuity and starts to receive the payments, but dies before he gets the entire amount, the rest is paid to a third person, according to the owner’s wishes. This annuity is the preferred choice of those who want to leave something for their loved ones.
The joint income annuity, and the joint or survivor income resemble very much: each type of annuity is based on two covered persons, and pays accordingly. The only difference is the length of the payout, and the amount. If someone wants higher payments, a joint annuity might work better, but it stops as the covered individual passes away. The joint and the survivor income will pay as long as the person covered lives. This is a choice for couples who are both dependent on the annuity income.
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