Guaranteed Death Benefit

What Is a Guaranteed Death Benefit?

A guaranteed death benefit is a benefit term that guarantees that the beneficiary, as named in the contract, will receive a death benefit if the annuitant passes on before the annuity starts paying benefits.

Understanding Guaranteed Death Benefit

A guaranteed death benefit is a safety net on the off chance that an annuitant bites the dust while the contract is in the accumulation phase. This guarantees that the annuitant's estate or beneficiary will basically receive a predefined least amount, even however the contract had not yet arrived at the point where it would begin paying benefits. At times, the contract terms will specify that a designated individual will be instated as the new annuitant to assume the contract assuming that the original annuitant bites the dust during the accumulation period.

The guaranteed death benefit received amount contrasts among companies and contracts, however the beneficiary is guaranteed an amount equivalent to what was invested or the value of the contract on the latest policy anniversary statement, whichever is higher. The structure of the death benefit payout can likewise fluctuate. Now and again, it is paid as a one-time payoff in a lump sum, while different contracts direct that it be allocated on a periodic, progressing schedule.

Guaranteed Death Benefit Details

This type of clause is much of the time experienced comparable to life insurance coverage. A guaranteed death benefit is much of the time offered as an extra, discretionary benefit where a specific rider is added on to the primary policy to improve the standard coverage and terms. In this case, the benefit proceeds are guaranteed as long as the premiums are paid, and the policy stays active. This is especially engaging for life insurance policies including variable benefits tied to the performance of an underlying investment.

The contract holder benefits from this clause since they know that even in a worst situation imaginable, their estate or beneficiary will essentially get something, so the amount the contract holder had invested or paid in premiums was not squandered or forfeited totally. Along these lines, this term of the contract gives a form of protection and security for the contract holder's heirs or beneficiaries.

This benefit gives the annuitant peace of brain by ensuring that their beneficiary will be protected from down markets and diminishes in account value. For instance, in the event that there is an economic downturn and the overall market falls by 20% when the annuitant kicks the bucket, the beneficiary will in any case receive the full guaranteed amount as directed by the terms of the annuity and death benefit.

Special Considerations

Under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, several rule changes were executed viewing annuities that are offered as investment options to employees through their 401(k) plans.

Prior to the SECURE Act, if an employee kicked the bucket and held an annuity in their 401(k) plan, this would trigger the annuity's death benefit clause, which could mean the beneficiary would be forced to liquidate the annuity. The SECURE Act, nonetheless, makes 401(k) annuity investments portable, permitting beneficiaries to move their inherited annuity to one more direct legal administrator to-legal administrator plan, in this way killing the need to liquidate the annuity and pay surrender charges and fees.

Features

• A guaranteed death benefit is a safety net on the off chance that an annuitant bites the dust while the contract is in the accumulation phase.
• The guaranteed death benefit received amount varies among companies and contracts, yet the beneficiary is guaranteed an amount equivalent to what was invested or the value of the contract on the latest policy anniversary statement, whichever is higher.
• A guaranteed death benefit is a benefit term that guarantees that the beneficiary will receive a death benefit on the off chance that the annuitant kicks the bucket before the annuity starts paying benefits.