So you're thinking about pulling the trigger on a life annuity, but you're wondering about what happens to all the money if you pass away prematurely? Does it just go into a black hole? To the New York Yankees' salaries?
The insurance carrier CEO's mega-yacht? Well, with a simple change, it can go to whoever you like — called a refund life annuity — and an independent insurance agent knows all about them.
See, an independent insurance agent works with these types of concerns every single day, with access to some of the best carriers out there. This means you get exactly what you want, from all your questions answered, to the perfect coverage and price.
Pretty great, huh? But first, it's time to talk a bit more about refund life annuities before knockin' on your agent's door to get your own.
What Is a Refund Life Annuity?
A refund life annuity is a life annuity with a rider tacked on that refunds any amount remaining to your beneficiary should you pass away before receiving the full amount you paid in premiums.
Life annuities can be thought of as longevity insurance, and in many ways, they’re the opposite of a life insurance policy. But a refund life annuity is a hybrid of the two, providing both a guaranteed income while you’re alive, and benefits to your beneficiary when you pass.
How Does a Refund Life Annuity Work?
A refund life annuity is paid for in installments over a period of time or in a single lump-sum payment, just like other annuities. When purchasing a conventional annuity, there are only three things you need to decide:
- How much you want to invest
- The size of the payments you want to receive
- The length of time you want to receive them
But with a refund life annuity you may have to make two more decisions:
- Whether you want the balance remaining at death to be paid in a lump sum or in installments over a period of time. An annuity that pays in installments will offer slightly higher payments than an annuity that pays in a lump sum.
- If you want payments to continue until both spouses die, you will need to add the joint annuity option. This means that the annuity will pay the remaining balance to the beneficiary (usually children) only after both spouses die.
Who Needs a Refund Life Annuity?
This type of annuity is generally a good call for any person or couple with dependents who wants a stable, guaranteed income for life but also wants to leave some benefits to children or another beneficiary.
Adding a joint option will reduce the monthly payments or increase the initial cost, but this option makes a refund life annuity more sensible for someone with dependents.
There are two other less common situations where a refund life annuity may make sense for you:
- A refund life annuity can substitute as a life insurance policy for those who can’t buy life insurance due to health reasons. Since an annuity is an investment contract rather than a life insurance policy, your health issues don’t matter. You won’t be turned down even if you have a terminal disease.
- As a substitute for a long-term care policy. Long-term care policies can be expensive, especially as you get older or if you have preexisting medical conditions. Riders can be added to a refund life annuity that provide some level of long-term care coverage.
What Does a Refund Life Annuity Cost?
Calculating the cost of a conventional annuity is fairly simple and many calculators can be found online, but beware of these calculators. They offer only average or “typical” costs, or sometimes only prices from the company providing the calculator.
Calculating the cost of a refund life annuity, or any other type of life annuity, isn’t as simple as a conventional annuity because your age, gender, and other factors come into play.
The best way to find out what a refund life annuity costs is to contact an independent insurance agent who can assess your individual circumstances, find the best annuities for you, and provide exact costs.
Where Is the Best Place to Buy a Refund Life Annuity?
Using an independent agent is particularly important with annuities, especially life annuities, because although they’re simple at their core, the options available to choose from can make them complex and make it difficult to compare the offerings from multiple insurance companies.
An independent insurance agent can simplify and demystify this process for you and make the comparisons a total breeze.
Independent insurance agents can help provide you with a large selection of annuity products, including refund life annuities. This is a benefit you won’t get from a single insurance company or investment firm.
Why Choose an Independent Insurance Agent?
Independent insurance agents simplify the process of shopping for and comparing annuities. They'll explain the complex terms for you, cut through the jargon, and make sure you understand the fine print.
But most importantly, they work for you — not just one lonely insurance company. That means they can compare annuity products from many companies and pick the ones that are best for you at the best possible price.
They’ll also be there for you in the future if your needs change or questions arise. They work for you, and their only job is keeping you satisfied now and in the future.