Annuity income payments
One of the most important benefits of deferred annuities is your ability to use the value built up during the accumulation period to give you a lump sum payment or to make income payments during the payout period. Income payments are usually made monthly but you may choose to receive them less often. The size of the income payments is based on the accumulated value in your annuity and the benefit rate which is in effect when payments start.
The benefit rate usually depends on your age, sex, and the annuity payment option you choose, if it is a lifetime payout. For example, you might choose payments that continue as long as you live, as long as your spouse lives, or only for a set number of years. There is a table of guaranteed benefit rates in each annuity contract.
Most companies have current benefit rates as well. The company can change the current rate at any time, but it can never be less than the guaranteed benefit rates.
When income payments start, the insurance company uses the benefit rate in effect at that time to figure the amount of your income payment. Companies may offer various income payment options, and you, or another person of your choice, may choose the option.
Life only
The company pays income for your lifetime, but doesn't make any payments to anyone after you die. You might choose this option if you have no dependents, if you have taken care of them through other means or if the dependents have enough income of their own. This payment option usually pays the highest income possible.
Life annuity with period certain
The company pays income for as long as you live and guarantees to make payments for a set number of years - called the period certain - even if you die. The period certain is usually 10 or 20 years. If you live longer than the period certain, you will still continue to receive payments until you die. However, if you die during the period certain, your beneficiary gets regular payments for the rest of that period. If you die after the period certain, your beneficiary does not receive any payments from your annuity. Each income payment will be smaller than in a life-only income option, because the period certain is an added benefit.
Joint and survivor
The company pays income as long as either you or your beneficiary lives. You may choose to decrease the amount of the payments after your death, or you may be able to choose to have payments continue for only a set length of time. Again, because the survivor feature is an added benefit, each income payment is smaller than in a life-only income option.
Death benefit
In some annuity contracts, the company may pay a death benefit to your beneficiary if you die before the income payments start. The most common death benefit is the contract value or the premiums paid, whichever is more.
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