Adding Conditions to an Annuity
Posted in Annuity , Life Insurance
March 31st, 2009
Retirement planning takes thought, effort and dedication to be beneficial when the time comes. One possible vehicle that many investors opt into for devising their long term strategy is by becoming a contract holder of an annuity with a life insurance company. When a person decides to invest in an annuity, they are actually making an agreement with an insurance company that they will pay now towards life-time disbursements later.
Which Annuity is Right for You?
There are several varieties of annuities, and not all of them are created equally. If you are in the process of debating the annuity issue you must decide on what basic type of annuity you want (pure-life, joint, survivor, etc.) and how much you want to set yourself up for in the future. Then there are additional conditions you can add to an annuity to help customize it to suit your needs and goals.
If you opt for a pure-life annuity, you can add the condition of a minimum of several years payment in an additional clause to the annuity contract. With a pure-life annuity, you risk forfeiting your investment from the condition of dying before you are able to fully collect on your annuity. By adding a condition of mandatory period of time for payments, if you die earlier than expected, your beneficiaries will be able to receive the payments.
Adding Conditions to an Annuity
There are a number of conditions or “riders” that can be added to an annuity. Many of these clauses are focused on how to benefit the contract holder during their lifetime, and not necessarily beneficiaries. Some options include:
- Guaranteed minimum withdrawal benefit – provides the contract holder the ability to withdrawal from their annuity in amounts at least equal to the investment
- Guaranteed minimum accumulation benefits – will grant not only the investment value you made via cash contributions but will also include some time of appreciation and gains
- Guaranteed minimum income benefit – a set amount of payout will be dispensed each year, regardless of whether the amount invested supports that benefit level
As with other types of insurance payments, additional provisions and conditions added to an annuity will cost you more money out of pocket. If you are interested in finding out about other conditions that can be added to your annuity, it is best to speak directly with your annuity manager.