Life Annuities vs. Fixed Payout Annuities

If the payout phase of the annuity is a life annuity, the company promises that payouts will continue for as long as the annuitant (or annuitants) lives; the annuitant(s) can never outlive the income stream. (Note: technically, although, the owner of the annuity and the annuitant typically are the same person, occasionally the owner and the annuitant are different individuals.)

If the payout phase is a fixed-period annuity (also called a term-certain annuity), the company promises to pay stipulated amounts for a fixed or guaranteed period of time independent of the survival of the annuitant. An annuity payout can also utilize a combination of the life and fixed-period options, such as “for the greater of ten years or the life of the annuitant(s).”

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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