An annuity can be defined as a type of investment which guarantees payment of specific amounts of money at specific interval or in a lump sum single payment. Annuities are sometimes referred as the opposite of life insurance. This is because annuities protect the annuitant’s life against the possibility of living too long and outliving your resources. However, annuities are considered as an ideal investment option by many people.
Life annuities are one of the most popular types of annuities which pay a specified amount of money during the annuitant’s lifetime as long as the annuitant is alive. Life annuities are very important investment in one’s life as it will supply you with an income for the rest of your life. If the annuitant selects the guarantee choice, then the payments will be paid for a guaranteed number of years according to the period mentioned. This is referred to as a Single Annuity or a Joint Life Annuity with a specific guaranteed period. In this case of a Life Annuity, you cannot outlive your income. Most of the people select 15 years. If the annuitant dies during in the time, then a death benefit will be paid to his/her beneficiary. It is not necessary to select a life annuity with a guarantee period. You can also purchase life annuities without a guarantee period.
There are several factors which affect life annuity rates. Some of them are:
- The type of annuity your selected. For example, single annuity or joint annuity, level or increasing payments.
- Annuitant’s estimated life expectancy rate. That is the older you are, you need to pay higher rate. If you are selecting a joint scheme then your partner’s age will also be checked.
- The yield on long term fixed interest investments – annuities are generally invested in fixed rate investments and hence when the interest rates are low, your annuity rates will also be low.
The actual amount available to a borrower can change according to a number of factors such as security/collateral provided, general credit worthiness, and borrowing/repayment history. The vendor may also check if the borrower has any previous relation with the products or services by them. If the annuitant is a previous customer then there are chances for any reduction in the actual amount.
While selecting any life annuities scheme make sure that you are selecting the right one which suits you the best. There are many institutions which offer life annuity plan. The type of the scheme and its payments will be different according to the service provider you select. You can also search the internet to know online life annuity quotes. This helps you to compare between two or more service providers before sticking into any particular scheme.
Keep in mind that life annuities have no cash value at any time. Hence if you are not sure which annuity to select, it is advisable to contact a financial advisor who may be able to select an ideal one for you. Selecting a life annuity scheme is important as it will provide you with an income for the rest of your life.