An Annuity Certain specifies the number of benefits payments of a set amount. This option will guarantee a minimum amount that the insurance company will pay on an annuity. The annuity has a Death Benefit that provides for payment to be made to the designated beneficiary upon the annuitant’s death & will continue as long as the beneficiary lives. In effect, this annuity says that it will pay the benefits remaining of the period certain to the beneficiary. However, if the annuitant should survive the period certain, then the annuity performs as a Life Annuity.
Cecil dies 3 years after taking out an Annuity with a 5-year period certain. The Annuity Company will continue to make payments to his beneficiary for next two years. Insurance companies usually pay the present value of the remaining payments in a lump sum, so Cecil’s beneficiary will receive 2 annual payments.If Cecil had survived the first five years of annuitization (liquidation period), the annuity would have continued to be paid out in the normal manner, ceasing upon the annuitant’s death. A Life Annuity Certain is an annuity that ..guarantees a given number of income payments whether or not the annuitant is alive to receive them. If the annuitant is living after the guaranteed number of payments has been made, the income continues for life. If the annuitant dies within the guarantee period the balance is paid to a beneficiary. For example – under one common contract, a life annuity certain for 10 years, income payments are guaranteed for a minimum of 10 years. If the annuitant dies after receiving two years of payments the beneficiary would receive the remaining eight year of income. An annuitant who lives out the 10 years would receive income payments for life, but there would be none available to a beneficiary.”Article Source: http://EzineArticles.com/2076087
