Most Common Options for Annuity Settlements
Before going to the most common options for annuity settlements, it is good to take a step back and understand what an annuity is. An annuity is actually a series of payment or income from an investment that you have made previously. Typically, an annuity is an insurance product with a fixed monthly premium that you need to pay for a certain period. This phase is called accumulation phase or the time when you need to pay regularly for your investment to accumulate the necessary amount needed. There is also repayment phase wherein the insurance company must pay the policy holder in accordance with the contract or agreement together with accrued interest.
There are three most common types of annuity settlements. These are: refund annuity, joint life insurance, and term life annuity. Refund annuity is typically more expensive than other settlements but it guarantees full return of the original amount that you have invested in (plus the agreed interest) even if you die before the company has completed the payment. The remainder shall be given to your beneficiaries.
Joint life insurance covers two or more individuals where death benefits are paid out when one of the covered individuals dies and the contract persists throughout the lifetime of the surviving annuitant. Spouses and small business partnerships opt for this kind of policy to protect the surviving party. In some cases (especially involving spouses), payment is made on the second death where children are the ones to receive the death benefits.
Term life annuity works like a normal life insurance with a fixed premium rate. When the coverage expires, however, the insured will have to purchase another policy to remain covered. In the event that the annuitant acquires a terminal disease during the policy period, he shall no longer be eligible to get another policy after his initial policy’s expiration. Term life annuity does not offer much, but it is cheaper than most policies. Its main objective is to provide necessary amount for the basic living expenses of the family when the annuitant falls ill and becomes ineligible for coverate.
You need to weigh things really carefully when choosing from the different annuity settlements. Different people have different circumstances and financial needs. Your financial needs and goals and your current available financial resources to pay for your premiums should determine the kind of annuity you choose.