Straight Life Annuity
What Is a Straight Life Annuity?
A straight life annuity, at times called a straight life policy, is a retirement income product that pays a benefit til' the very end yet does without any further beneficiary payments or a death benefit. Like all annuities, a straight life annuity turns out a guaranteed revenue stream until the death of the annuity owner.
What makes a straight life unique is that, when the annuitant kicks the bucket, all payments stop and no more money or death benefits are due to the annuitant, their spouse, or heirs. This makes the straight life annuity more affordable than numerous different types of annuities and retirement income products.
How a Straight Life Annuity Works
While many types of annuities permit the annuity owner to name a beneficiary (generally a spouse) who will be eligible for either proceeded with payments or death benefits, a straight life annuity swears off this additional benefit for higher guaranteed payments while the annuitant is alive.
A straight life annuity policy might be bought throughout the annuitant's working life by making periodic payments into the annuity, or it could be purchased with a single lump-sum payment. Typically, lump-sum purchases are made at, or not long after, the annuitant's retirement. Either payment option will bring about similar standard payments.
With the exclusion of the survivor and death benefits, a straight life annuity owner can accomplish the highest conceivable regularly scheduled payment. In like manner, such an annuity is best fit to people who lack a spouse or partner.
In effect, it acts as a straight wagered on longevity; the more drawn out the owner/annuitant lives, the more they will receive in payments. It has no provision for restricting risk in case of premature death, wherein case the annuity writer keeps the balance. Straight life annuities may not be the best decision for couples who live off of the retirement income the annuity gives.
Like all annuities, straight life annuities act as longevity insurance.
In such a case, the enduring spouse would have to have an alternate source of income, logical another annuity. Straight life annuities may not be a decent decision for people who plan to pass along their wealth to heirs, all things considered.
Special Considerations
Alternatives to Straight Life Annuities
As an alternative, there is the joint and survivor annuity, which keeps on making payments until both named people (owner and beneficiary, generally spouses) are deceased. There is likewise the life plus period certain annuity, which pays a benefit for either the annuitant's lifetime or for a specific period of time, whichever is longer. There is likewise the cash refund annuity, which is a guarantee that a spouse or beneficiary will receive a sum equivalent to the premium paid into the annuity (minus the sum of payments previously made) should the annuity owner/annuitant kick the bucket before breaking even.
Features
- Outright purchases of annuities are normally done just following retirement.
- Straight life annuities, due to the fact they don't pay anything upon death, are normally best for individuals without partners or beneficiaries.
- Along these lines, straight life annuity products are generally more affordable than other, comparative products.
- A straight life annuity totally stops payments upon death, in contrast to different annuities.
