Annuity Settlement Options

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Published: 22nd October 2009
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Annuity Settlement Options

Individual investors have a variety of decisions to make when investing into annuities, including settlement options, premium options, and additional benefit riders. While many investors utilize annuities for either capital preservation or appreciation, their primary purpose is generally to provide a method of generating income for the annuitant, otherwise referred to as annuity settlement.
Annuity owners have several annuity settlement options available for consideration, including:
Straight Life Annuity- One of the most common settlement options available, straight life annuities offer the annuitant 'income for life'. Income is provided to the designated annuitant without survivorship in most cases, meaning that when the annuitant dies, no benefit will be paid to beneficiaries. The primary purpose of a straight life annuity is to ensure that the investor does not run out of income during their lifetime, a common concern for many retirees of today.
Straight Life Annuity with Period Certain- For those account owners seeking survivor benefits for their spouse or other designated beneficiaries, straight life annuities with period certain features are commonly selected. These annuities provide income for life with a period certain feature. The period certain feature provides a death benefit if the annuitant dies before a period certain. For example, if an annuitant is receiving $2,000 per month in income from their 10 year period certain annuity but dies within the 4th year, the designated beneficiaries will have the option to receive a refund or return of income proceeds.
Instalment Refund Option- This option pays the designated beneficiaries the same income benefit which the annuitant was receiving until the period certain outlined within the annuity contract.
Cash Refund Option- This option when available provides the refund in a lump sum to the designated beneficiaries, representing the remaining guaranteed amount.
While the primary purpose of annuities is to provide an income stream to the investor or annuitant, variable annuities often do not require a pre-determined settlement option, giving the option to withdrawal funds periodically if desired rather than receiving the proceeds in a fixed income fashion. A financial planner or insurance advisor can further explain these options, ensuring that the best settlement option is chosen to match the individual investor's specific financial needs.

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