What is a Life Annuity

(Like getting a salary without all the work)

Written by Brandi Calero-Holmes

The financial information you need without feeling discouraged or nervous. Positive solid information is what's given so you can learn with an open mind.

paul martin Reviewed by Paul Martin
paul martin
Reviewed by Paul Martin

Paul Martin is the Director of Education and Development for Myron Steves, one of the largest, most respected insurance wholesalers in the southern U.S.

What is a life annuity

Hitting retirement and realizing you should have planned your money better can be a scary thought. But the good news is that avoiding this scary moment is totally avoidable and really easy. A simple investment in a life annuity can give you or your loved ones the financial coverage needed later in life. 

And an independent insurance agent is always there to help. They'll get the ball rolling and answer all the questions you have, help you shop for the right options, and stick around to guide you through it all. But first, here's a bit of background to give you a better understanding of it all. 

What Is a Life Annuity?

Simply put, a life annuity is an investment where a recipient (or "annuitant") can get scheduled payouts at a later date that can serve as another source of income. In most cases, there are multiple annuitants that will receive this benefit based on the amount invested.

When looked at from a multiple annuity scenario, it can be used as a way to compensate loved ones such as a spouse or children if anything happens to you. Annuities can be used to better control the life insurance benefits received instead of in a lump sum.

Why Chose an Annuity Versus a Lump-Sum Insurance Payout?

Some people prefer the stability of monthly payments over a period of time instead of in one big cash dump especially when it comes to a spouse who's trying to replace the deceased's income. 

Or, maybe you don't trust yourself with all that insurance payout at once, in which case, a scheduled annuity may be the best route to take.

For example:

If a husband passes and has an insurance policy, his wife can receive the death benefit as a monthly income. She can arrange it so she's given $2,000 per month for, say, 5 to 10 years and later change it to $3,000 per month. Whatever she decides on is fine.

With multiple life annuities, the payments can continue to roll over to the next annuitant if it's arranged that way in the contract and is a nice, stable approach for the long run.

The insurance payout you leave behind to your beneficiaries can also be in the form of a lump-sum payout, too. But a scheduled payout would give your loved ones the same stability you received when the annuity was in your hands. 

Of course, the beneficiary can decide at any time how they want to receive the payout. Just work with your independent insurance agent to make sure you're all set in the right direction.


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What Factors Help Determine Annuity Income?

It's important to know that no two annuities are exactly the same. Annuities are customizable, so you'll be sure to have an annuity specifically for you. However, it is the specifics that determine your overall costs for the annuity. Once you have determined some key factors, calculating your annuity costs is much easier.

Factors Affecting Life Annuity Income

  • Age: Payments could increase with age, depending on how your annuity is arranged.
  • Amount paid into annuity: However large or small the purchase price of the annuity is, the future payments will change.
  • Interest rate: If you have a fixed annuity, it's important to know the interest rate the insurance company charges.
  • How much has been paid: Understand that beneficiaries get whatever's left of your benefit. If an annuity is for $100,000 and the annuitant has received $59,000 in annuity income, the beneficiary will receive only the remaining $41,000 in annuity income.

When Is a Life Annuity the Best Option?

You're probably wondering if a life annuity is the right call for you. An independent insurance agent can take a more in-depth look at your goals and needs to help you decide. But for now, here are a few common circumstances where a life annuity would be best for you:

  • When you want to leave behind a steady stream of income to your spouse or children after you pass.
  • When you want to replace your salary into retirement with a scheduled payout. 
  • If the idea of a lump sum seems reckless to the situation, a scheduled life annuity can be a more responsible option.

Even before you're gone, you want to make sure you have enough finances when you retire. An annuity can be a great option for retirement income because it consists of stable, ongoing payments.


Get Annuities from the Experts

Our independent agents shop around to find you the best coverage.

Compare Annuity Options with an Independent Insurance Agent

Look, your time is valuable, so why spend it doing all the hard work yourself? An independent insurance agent is an absolute expert in annuities and will help you determine what type of annuity investment makes the most sense for your goals and needs.

They’re not just there at the beginning, either. As changes and 

events occur, you'll have a trusted annuity expert by your side to ensure your annuity provides the financial coverage you planned for.

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