What Is a Blunt Life Annuity?
A straight life annuity, sometimes called a straight life policy, is a retirement income effect that pays a benefit until death but forgoes any further beneficiary payments or a death benefit. Like all annuities, a unembellished life annuity provides a guaranteed income stream until the death of the annuity owner.
What makes a in a beeline life unique is that, once the annuitant dies, all payments stop and no more money or death benefits are due to the annuitant, their spouse or successors. This has the effect of making the straight life annuity less expensive than many other types of annuities and retirement gains products.
What Is An Annuity?
How a Straight Life Annuity Works
While many types of annuities allow the annuity holder to name a beneficiary (usually a spouse) who will be eligible for either continued payments or death benefits, a straight enthusiasm annuity forgoes this added benefit in favor of higher guaranteed payments while the annuitant is alive.
A flat life annuity policy may be bought over the course of the annuitant’s working life by making periodic payments into the annuity, or it may be gained with a single lump-sum payment. Usually, lump-sum purchases are made at, or shortly after, the annuitant’s retirement. Either payment way out will result in the same regular payments.
Key Takeaways
- A straight life annuity completely stops payments upon ruin, unlike other annuities.
- Because of this, straight life annuity products are usually less expensive than other, correspond to products.
- Outright purchases of annuities are usually done just following retirement.
- Straight life annuities, due to the happening they pay nothing upon death, are usually best for people without partners or beneficiaries.
With the omission of the survivor and downfall benefits, a straight life annuity owner can achieve the highest possible monthly payment. Accordingly, such an annuity is master suited to individuals who lack a spouse or partner.
In effect, it acts as a straight bet on longevity; the longer the owner/annuitant alights, the more they will receive in payments. It has no provision for limiting risk in case of premature death, in which carton the annuity writer keeps the balance. Straight life annuities may not be the best choice for couples who live off of the retirement revenues the annuity provides.
Like all annuities, straight life annuities act as longevity insurance.
In such a case, the surviving spouse desire need to have an alternate source of income, likely another annuity. Straight life annuities may not be a good realm of possibilities for individuals who intend to pass along their wealth to heirs, either.
Special Consideration: Alternatives
As an alternative, there is the joint and survivor annuity, which maintains to make payments until both named individuals (owner and beneficiary, usually spouses) are dead. There is also the moving spirit plus period certain annuity, which pays a benefit for either the annuitant’s lifetime or for a specific period of sooner, whichever is longer. There is also the cash refund annuity, which is a guarantee that a spouse or beneficiary on receive a sum equal to the premium paid into the annuity (minus the sum of payments already made) should the annuity proprietress/annuitant die before breaking even.