What is a Pure Life Annuity?

Retirement planning is an essential task everyone must pursue in order to provide a level of financial comfort for themselves. One investment tool that is commonly used are annuities, where you pay a premium over an extended period of time in order to collect cash benefit payments at a later date. A pure life annuity follows that basic structure,and offers either fixed or variable payments until the annuitant perishes. At that point, the payment cycle is terminated.

Pure Life Annuities Can Be Risky

Pure life annuities have the potential of short-changing the estate of the investor. Generally a pure life annuity will pay out benefits to the policyholder until they die. Consider if set up an annuity that begins paying you upon your 65th birthday. Until that point, your life goal was socking away as much money as possible to help ensure that you would live comfortably when you retire. If you live another few decades, the pure life annuity could be of value, providing you with a steady stream of income until you die.

However, what if the pure life annuity payouts kick in as scheduled, but you perish prematurely and only after a couple of years of receiving your benefits? A pure life annuity will cease paying out any of your investment upon your death. A pure life annuity would only pay out a small amount comparable to the amount of investment contributions you made over your lifetime.

Add Clauses to Protect Your Annuity Investment

Pure life annuities come with the risk of your estate being short-changed from your original investment goal. If you want to ensure that a forfeiture is avoided, an added clause can help provide an additional level of protection. With additional verbiage to your annuity contract, it can be specified that the life insurance provider must make a required number of annual payments. If you outlive that period, the annuity payouts will continue. However, if you perish prematurely, your estate will be able to collect the additional funds before the clause date term expires.