Life Annuity

A life annuity is almost similar to a pension plan where you make a single payment or a series of payments to the insurance company for a set period, and the company pays you back the original capital. In other words, it is like a loan you make with an insurance company who pays you back the original capital you loaned them. The estimated period of the loan is based on your own life expectancy.

Variants of the life annuity

You can purchase a life annuity not only for yourself but also for other members of your family like your husband or wife or a friend. However, the life annuity of your family members or friend must be guaranteed partly or in whole by an increase in payments or a decrease in the benefits.

Another variant of life annuity is life with a period certain annuities. This means that in the event that people who have accumulated money during their lifetime die soon after their annuitization, they will not lose their accumulated money. Their beneficiaries will receive the payouts from the insurance company so they will still have something you gave them after you pass away. This is actually your way of telling your beneficiaries and dependents that you will always be there to take care of them, no matter where you are.

One consideration some insurance companies offer is the impaired life annuity. This is usually offered to smokers or those individuals who suffer from regular illness. Since individuals who fall into this category has a reduced life expectancy, the annual payments to the one who is getting the life annuity is higher than others who are not in this category.

One thing you must be aware of is that the price of a life annuity is based on the probability of your surviving to receive the payments which the insurance company will make to return the amount you invested. As much as you want to delay dying, you can also avail of longevity insurance. However, you should be aware that this is one type of life annuity that a gives you or your dependents no benefits if you die before your annuity payments will start coming in.

With the disadvantages to consider, it is not surprising that the cost of the annuity you are regularly paying will soar high. Anyway, this is also an excellent way of living within your means and providing protection against outliving your own account.