Annuity Payment Options
Annuity payouts for a life insurance policy can take many forms. Here are the most common options:
1. Monthly Income Payments for Life.
Beneficiaries can choose to receive a specified amount monthly for the rest of their lives. The insurance company will take into account the total amount of the policy, their ages, and other factors to determine what the monthly income payments will be. In the event that one of the beneficiaries dies before all the money is paid out, the insurance company will either revert it to any other beneficiaries or they get to keep the balance of the money.
2. Period Certain Payments.
Period certain payments for life insurance payouts mean that your beneficiaries will be guaranteed a portion of the payout every year over a specified period, say 10 or 15 years. If they die before you receive the total payout, a beneficiary they designate will receive the balance over the period specified until the payout amount has been completely paid in full.
3. Interest-Only Payments.
With interest only payouts, beneficiaries receive only payments of interest that accrued on the principle insurance value over time. If your beneficiaries don’t need extra money at the time of your death because there have not been excessive bills involved with medical expenses or funeral costs, then choosing to receive the insurance payout gradually, to receive the settlement principle or balance of the payout to which they are entitled, can help guarantee steady income for some time to come.
4. Joint and Last Survivor Income Payments.
In this method of receiving a life insurance payout, the beneficiary elects to receive a guaranteed yearly amount of income for his spouse and/or children for as long as they live. Payouts are guaranteed to continue until the last named beneficiary dies.
5. Specified Amount Payments.
The specified amount choice for annuity life insurance payments allows you to decide how much money beneficiaries will receive over what period of time. For example, if the life insurance payout is $250,000, they might elect to take $25,000 per year for 10 years. If they die before they receive the total payout, their own beneficiary whom they would list at that time would receive the balance of the funds until they were paid in full. Understanding the differences among life insurance policy payment methods will help you better plan for your family’s future after your death.
Your insurance policy may sound like a lot of money, but even as a lump sum payment, it can get eaten up quickly by funeral costs and medical expenses if you have not factored these into the equation. People also respond in different ways to receiving a large amount of money. And indeed some people are a lot better at managing their money than others. Therefore, you need to take all of these factors into account when planning your insurance, purchasing your policy, and writing your will. You know your own family members best, and no two people are like, so make your decisions based on them and their likely circumstances rather than try to use a one size fits all approach. Your main priority will be that they should not be left broke by any final expenses you may incur at the time of your death, or by any plans you have for your funeral and so on.
No one ever wants to think about their own death, but buying life insurance and good estate management planning can help set up your family financially so that they will be able to support themselves if you were no longer there to help. If you have not consulted with a financial planner recently, do not have an insurance policy, or you think you are under-insured, it is time to take stock of all your finances. Review your financial situation and insurance policies and start getting organized today to ensure your family’s future.