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

Many people are unaware of what a life annuity with a period certain annuity is. However, knowing about this type of annuity is essential 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-specific works and some advantages and disadvantages that come with it.

What is a Life Annuity with a Period of 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, typically 5 to 20 years. If the annuitant dies before the guaranteed period has expired, the payments can be passed to a beneficiary.

Helpful Tool: period certain annuity calculator

How Does a Life Annuity with Period Certain Annuity Work?

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

What Is A Contingent Annuity?

A contingent annuity is one 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. 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 of a particular 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

• Immediate Annuities
• Deferred Income Annuities
• Lottery Annuities
• Structured Settlements
• Fixed Annuities
• Fixed Index Annuities
• Variable Annuities
• Two-Tiered Annuities

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

• There is no death benefit if the annuitant lives beyond a specific period.
• The payout earns little to no interest.
• Owners give up control over their money to the insurance company.

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. The beneficiaries will not receive a death benefit if the owner dies after the guaranteed term.

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Next Steps

A straight life annuity with a specific period 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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