Life Annuity With Period Certain: How Does This Annuity Work?

Shawn Plummer

CEO, The Annuity Expert

Many people are unaware of what a life annuity with a period certain annuity is. However, it’s essential to know about this type of annuity because many people use them, which can be a valuable tool for retirement planning. This guide will explain how a straight life annuity with period certain works and some advantages and disadvantages that come with it.

What is a Life Annuity with Period Certain Annuity

A life annuity with a period certain annuity is a contract that guarantees payments for an annuitant’s entire life along with a guaranteed period of time, typically 5 to 20 years. If the annuitant dies before the guaranteed period has expired, the payments can be passed to a beneficiary.

How does a Life Annuity with Period Certain Annuity Work?

The life annuity with a period certain provides a life annuity with a guarantee for a certain period of time. This annuity guarantees a lifetime income, but if the death occurs within the guaranteed period of time, annuity payments will continue to pay the designated primary beneficiary for the remainder of the guaranteed period.

What Is A Contingent Annuity?

A contingent annuity is an annuity in which payments are made to beneficiaries only if certain conditions are met. The most common use of contingent annuities is for life insurance and pensions, where death benefits or payments are made only if the insured person is alive or the policyholder dies.

In the case of life with a period certain annuity, a beneficiary will inherit the annuity’s death benefit only if the annuitant dies during the guaranteed period (period certain).

Types of Life With Period Certain Annuities

  • Single Life Annuity With Period Certain: A life annuity with a period certain provides lifetime payments for one person with guaranteed income for a specified number of years.
  • Joint Life Annuity With Period Certain: Payments for your lifetime and the lifetime of another person (two persons) with a minimum guaranteed payment period.

Annuities That Offer Period Certain Payouts

Pros and Cons of Life Annuity With Period Certain

Pros

  • The annuitant receives payments for the rest of their life.
  • The owner can set the guaranteed payment schedule. They will know how many payments their beneficiary will receive in case of premature death.

Cons

What Do My Beneficiaries Receive When I Die?

If the owner of a Life Annuity with Period Certain dies before the guaranteed period, the beneficiaries will receive the remaining payments until the guaranteed period has passed. If the owner dies after the guaranteed term, the beneficiaries will not receive a death benefit.

Helpful tip: Life insurance might be a better option if you want to leave money to your beneficiaries. In some cases, you don’t need to take a medical exam. Instead, use our free tool to shop quotes for life insurance. Coverage starts at $9.37 per month.

Next Steps

A straight life annuity with period certain can be a valuable tool for retirement planning. Still, it’s essential to understand the advantages and disadvantages before deciding if this is the right option for you. If you have any questions about how this type of annuity works or would like a quote, don’t hesitate to contact us. We’re happy to help!

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Frequently Asked Questions

Which type of annuity guarantees a stated number of payments?

Life annuity certain provides an income for life with a guaranteed stated number of payments.

A life annuity with period certain is characterized as

 A life annuity with a period certain is characterized as a hybrid annuity payment option that provides lifetime payments with guaranteed income for a specified number of years.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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