Financial Web
> Group Life Insurance
> Lowering Your Life Insurance Rates
> Choosing Individual and Family Health Coverage
> Preparing for Your New Motorcycle
> You CAN Lower your Premiums
> Finding Affordable Health Insurance
> Policy Continuation Options
> Bundling your Insurance with one Company
> The High Price of Health Insurance
> Is your Homeowners Insurance Sufficient?
> Permanent or Term Insurance: Which should you choose?
> The Necessity of Health Insurance
> Buying Homeowner's Insurance: A Process
> Sports Car Insurance
> 15 Ways to cut Your Medical Costs
> A Few Words About Dental Insurance
> Annuities
> Auto Insurance - What do You really Need?
> Annuity Options
> A Life Insurance Primer
> Beware of Unfair Trade Practices
> Blended Life Insurance
> Be Aware of these Life Insurance Clauses
> Blue Cross and Blue Shield
> Beneficiaries and the Uniform Simultaneous Death Act
> Consolidated Omnibus Budget Reconciliation Act (COBRA)
> Credit Insurance
> Comparing Life Insurance Policy Costs
> Coordination of Benefits
> Control what You Can
> Characteristics of Insurance Contracts
> Compare when Buying Auto Insurance
> Disability Insurance
> Disability Insurance for Businesses
> Endowments
> Examining Annuity Premiums
> Flexible Life Insurance Policies
> Glossary of Insurance Terms
> Government Health Insurance
> History of Insurance
> HMO vs. PPO
> How Your Insurance Premiums are Calculated
> Homeowners Insurance
> Insurance Beneficiaries
> If You’re Involved in an Accident…
> Immediate and Deferred Annuities
> Insuring Your Teenage Driver
> Insuring Your New Motorcycle
> Know your Car Insurance Policy
> Long-Term Care (LTC) Insurance
> Life Insurance in Business
> Life Insurance in Business - Part 2: Partnerships and Corporations
> Life Insurance in Business - Part 3: Corporate Life Insurance Strategies
> Limited Policies
> Life Insurance is Your Property
> Major Medical Insurance
> Medical Savings Accounts
> Medicare
> Medicaid
> Medicare Advantage Coverage
> No Health Insurance?
> Optional Disability Insurance Benefits and Riders
> Other Types of Annuities
> Paying for Dental Care
> Pass on these Insurance Offerings
> Payment of Claims
> Prepaid Dental Plans
> Rental-Car Insurance
> Rating the Risks
> Some Insurance Riders
> Some Whole Life Policies
> Sufficient Insurance for your Needs
> Specialized Life Insurance Policies
> Some LTC Specifics
> Some Common LTC Policy Provisions
> Settlement Options for Annuities
> Save on Your Homeowners Insurance
> Types of Life Insurance
> Term Life Insurance
> The 10 Best Ways to Lower Your Car Insurance Bill
> The Basics of Underwriting Insurance
> Things to Remember When Buying Healthcare
> Ten Questions for Your Managed Care Plan
> Types of Term Policies
> Types of Insurance Providers
> Taking more Responsibility for your own Health Care
> Underwriting Group Policies
> VA Health Benefits
> Variable Annuities
> Workers Compensation
> Your Health Insurance - What You’re Paying
> Your Health Insurance - and what it should Cover

Settlement Options for Annuities

Although the basic premise and reasoning for purchasing all annuities is the same, the ways that benefits may be received by the annuitant (or the annuitant's beneficiaries) can be diverse. There are a number of settlement options that can be chosen for the distribution of annuity payments. The most common are listed here:

Life Annuity – No Refund

The life annuity is a general payout category in which the payout is guaranteed for life. Sometimes known as a straight life annuity, the life annuity pays a benefit for as long as the annuitant lives, and then it ends. Whether the annuitant lives past 100 years of age or dies one month after the annuity period starts, the annuity payments will continue only until he or she dies. In other words, there is no guarantee as to the minimum amount of benefits under a life annuity.

Needless to say, there's a risk to the annuitant that he or she might not live long enough once the annuity period begins to collect the full value of the annuity. If an annuitant dies shortly after benefits begin, the insurer keeps the balance of the unpaid benefits. This settlement option will pay the highest amount of monthly income to the annuitant because it's based only on life expectancy with no further payments after the death of the annuitant.

However, many people were not pleased knowing that most or all of their investment would be lost if they were to die after receiving just a few payments. This backlash caused insurance companies to start offering alternative options that provided at least a minimum guaranteed payout, such as those listed below:

Refund Life Annuity

The length of time for which income payments will be made to the annuitant under a refund life annuity contract is the same as that for a straight life annuity. Thus, with this option the annuitant will receive payments for as long as he or she lives.

The main difference between the two is that the refund annuity guarantees an amount at least equal to the purchase price of the contract will be paid out. If the annuitant lives for an extended amount of time after annuity income payments begin, he or she could receive more in benefits than the contract cost. But, if the annuitant dies before an amount equal to the annuity's purchase price has been paid, the annuitant's beneficiary will receive the difference in cash or installment payments.

Life Annuity Certain

Another type of annuity is the life annuity with period certain, which guarantees payments for a certain minimum number of years – typically 10, 15, or 20 (most often, the period is 10 years because this is the approximate average life expectancy of a male who retires at age 65). Obviously, the annuitant could outlive the minimum number of years specified in the contract, in which case the income payments continue until his or her decease.

Under a life annuity with period certain, income installments must be paid for the number of years guaranteed in the contract. Therefore, if the annuitant dies after payments have started but before the guaranteed number of years (the "certain installments") has elapsed, the annuitant's beneficiary will receive income payments until the remainder of the guaranteed period expires. So, if Mr. Smith, the annuitant, retires at age 65 and selects the life with 10 years certain option and dies at age 70, his survivor will continue to receive the monthly annuity payments for the balance of the period certain, in this case five more years.

Joint Life Annuities and Joint Life and Survivorship

With a joint life and survivorship (or last survivor) annuity, there are more than one (usually two) annuitants, and both receive payments until one of them dies. A stated monthly amount is paid to the annuitant and upon the annuitant's death, the same or a lesser amount is paid for the lifetime of the survivor.

The joint-survivor option is usually chosen as one of three alternatives: joint and 100% survivor, joint and two-thirds survivor, or joint and 50% survivor. For example, if the annuitant was receiving $1,000 monthly under a joint and 50% survivor option, the survivor would receive $500 (50% of $1,000) monthly upon the death of the annuitant.

The joint-survivor annuity is significantly different and must be distinguished from the joint life annuity, which covers two or more annuitants and provides monthly income to each until one of them dies. Following the death of one annuitant, all income benefits cease. The joint life annuity can be viewed as a special case of the straight life annuity, with payments ending at the first death among the joint life annuitants.

Temporary Annuity Certain

As previously stated, under a life annuity with period certain, if the annuitant lives longer than the "certain" period stated in the contract, income payments continue for the lifetime of the annuitant. However, this is not the case with a temporary annuity certain. If the insured outlives the period of payments stipulated in the temporary annuity certain contract, payments stop at the end of the period.

Under a temporary annuity certain, the company guarantees that payments will be made for a specified number of years. Since this income is guaranteed, if the annuitant dies before receiving payments for the full specified period of time, the annuitant's beneficiary will receive the payments for the remaining number of years.

Deferred Annuity Death Benefits

In the case of a deferred annuity contract, the annuitant could die before receiving even one income payment under the contract – perhaps several years before the first income payment fell due. Although individual company policies can vary greatly as to what amount will be paid to the annuitant's beneficiary or other heirs, most companies refund at least the amount that the purchaser has paid for the contract up to that point (some may also include any accrued interest on that amount). And while these proceeds do not actually represent death protection like the benefits payable from a standard life insurance policy, the amount refunded from a deferred annuity may still be correctly called a death benefit.