In this method, the customer pays a single, lump sum premium when the contract is signed initially

Premium Options

This method pertains to deferred annuities only. The customer pays premiums on a regular set schedule whether it be annually, semiannually, quarterly or monthly until the date on which benefit payments begin.

This method again pertains to deferred annuities only. Flexibility is permitted in the timing and amount of premium payments. This flexible premium annuity in which they can vary the amounts they save each year.

Settlement Options

Settlement options refer to the various ways funds will be distributed from an annuity. Terms are agreed upon by the annuitant and the insurance company determining when the owner wishes to begin receiving income from the annuity.

This settlement may be made in a single lump sum. The lump sum includes both the amount the owner paid in premiums, and the interest those funds have earned.

The annuitant may wish to receive interest only payments until a later date on which another settlement option may take effect.

The annuitant may elect to have the settlement paid in a specified number or dollar amount payment over a number of years.

The life income option is the most common payment associated with annuities. With the life option, the annuitant receives payments until he or she dies. Payments may or may not continue after the annuitants death. Three life income options are straight life, period certain and refund.

A straight life annuity contract provides for guaranteed periodic payments that terminate upon the death of the annuitant. No remaining balance is paid to a beneficiary or to the annuitants estate after the annuitant dies.

Some individuals do not want to use the duration of their lives as the factor that determines whether they will profit, break even, or perhaps even lose money on their investments. Therefore, straight life annuities do not interest them. Period certain and refund options guarantee a minimum amount that the insurance company will pay on an annuity. Both of these options can be regarded as types of death benefits, since they provide for payment to be made to designated beneficiaries upon the https://cashcentralpaydayloans.com/payday-loans-ok/ annuitants death.

Number of Annuitants

An annuity contract may be written to provide for one or more annuitants. If there is only one annuitant named in the contract, the insurance company agrees to provide that person with income beginning on a specific date and to continue for an agreed-upon period, which is normally the duration of the individuals life.

Some contracts cover more than one person. A popular contract of this type is the joint and survivor annuity. With this arrangement, two people are insured, most commonly the husband and wife. Beginning on the date in the contract, payments are made to the annuitants. The payments are guaranteed to continue to the surviving spouse upon the other spouses death. Depending on the contract terms, the continuing payments will either be in the same amount as when both the annuitants were alive or to be reduced.

Two types of joint and survivor annuities are most commonly used. With a joint and two-thirds survivor option, the surviving spouse receives two-thirds of the income paid to the original annuitant. With a joint and one-half option, the surviving spouse receives half of the income.

Surrender Terms

Another set of annuity contract terms which is important to an investor are the surrender charges. The word surrender describes the termination of an insurance contract, such as an annuity, by the owner. When an individual surrenders a contract, he or she turns in to the insurance company the documents stating the contract terms. In return, the company gives the owner a sum of money which is known as the surrender value.