What Is Life Insurance Annuity

What is life insurance annuity, and what does it offer to you? First you must understand exactly what an annuity is, and then understand how this is combined with traditional life insurance coverage. An annuity is an insurance policy which involves the insurance company making structured payments to you in the future, and in exchange you make either one lump sum payment to cover the premium costs or you agree to make premium payments at regular intervals. Many times these policies are purchased so that retirement income is supplemented by the annuity payments, and this may be an option if you are worried about retirement finances. With a typical annuity the payments would stop upon your death, and your loved ones and heirs would not receive anything no matter how much you had paid in or how short your payment period was before death. A life insurance annuity is usually a little different, with smaller annuity payments being paid during your life in exchange for a guaranteed death benefit for your heirs as well. The cost of these policies are more expensive than traditional life insurance or traditional annuity products, but you will receive the benefits from the annuity payments and your heirs will be left financially secure at the same time.

A life insurance annuity contract can be purchased for any amount, and this is true of either component. You can create the annuity payment amount which is ideal for you, and which you evaluate you will need to live comfortably during your retirement years. This annuity can be paid yearly or annually, depending on your preferences, and will last until your death, unless there is an annuity rider which continues payments until your spouse also dies, and this secondary coverage may include the same annuity amount to your spouse or a smaller benefit after your death. The life insurance face value can also vary, depending on the amount that you want to leave your loved ones to ensure their financial security. The higher the annuity payments or the death benefit amount are with these policies the more costly your life insurance annuity insurance premiums will be.

With a life insurance annuity you will choose beneficiaries for the life insurance benefit of the policy, and these payouts are done outside of probate and are not normally included as part of your estate. This allows you to leave your loved ones the financial means to take care of themselves, without worrying about inheritance taxes or other large chunks being deducted. There are also two types of annuities that you need to consider for the other component of this type of policy. An annuity can be fixed or variable, and this refers to the amount of the annuity payment to you at the future specified date. With a fixed annuity you have a guaranteed payment amount regardless of market activity, but this is not true with a variable annuity, where the payments are dependent on the market activity of the investments.