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Life Immediate
Annuities
Life immediate annuities,
also called life annuities, are immediate annuities that will pay
you lifetime payments. They can be based on a single life (a single-life
annuity) or on two lives (a joint-life annuity). They can even contain
a guaranteed minimum number of payments in the event of an untimely death.
Single-Life Immediate
Annuity
A single-life
immediate annuity or single life annuity simply pays you a
fixed payment until you die. After that, the payments stop. Your heirs
receive nothing more. It’s easy to see that if you live a long time, you
win. If you live a short time, the insurance company wins. While these
annuities contain risk for their heirs (i.e. when the annuitant dies,
nothing is paid to the heirs), single life annuities are a popular choice
for people who want to be absolutely sure they don’t outlive their income.
Joint-Life Immediate
Annuities
A joint-life immediate annuity or joint life annuity
is based on two lives. The payments continue until both people (i.e. joint
annuitants) are deceased. Since the income continues as long as either
person is alive, this type of annuity often is used by married couples
who are concerned about providing income to a surviving spouse. With a
joint-life annuity, you can even specify the percentage that the survivor
will receive after the first spouse dies. For example, a husband and wife
may invest in a joint-life annuity that provides $1000 per month in income
with a 50% benefit to the survivor. After one spouse dies, the surviving
spouse would receive $500 per month (50% of $1000) for the remainder of
his or her life.
Life Immediate
Annuities with a Period Certain
When you
invest in a life annuity, you can add a period certain feature as well.
For example, if you invested in a life annuity with a 10-year period certain,
you would receive payments for the rest of your life – no matter how long
you lived. However, if you died two years after you started the annuity,
your heirs would receive payments for 8 more years (for a total payment
period of 10 years).
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