From this day until the moment of our death…
Life annuities are generally a good product for an investor who is risk averse and doesn’t want to manage his portfolio. The annuity provides a steady income stream until the investor (also called the beneficiary) pass away. At this moment, depending on the type of contract, there may or may not be a remaining balances to be switched to the investor estate.
If you retire with your spouse, the perspective of losing a part of your money given to a life insurance company is definitely not appealing. What will happen to the surviving spouse? Will he/she be left with no revenues?
Joint Life Annuities
Life insurance companies are apparently very creative and try to meet every investors needs. A simple life annuity contract doesn’t cover for both spouses in the event of death of the beneficiary. In order to assure an income stream to both spouses, life insurance companies came up with a joint life annuity.
How the Joint Life Annuity Works
A regular life annuity stops at the investor death. Therefore, there are payments starting at the agreed date on the contract until the beneficiary passes away. The joint life annuity simply has two beneficiaries instead of one; the investor and his/her spouse. Therefore, it enables payments to be made until the death of the second beneficiary.
Payments start according to the contract and it is made in the name of one or both beneficiary. Upon the death of the first beneficiary, the annuity continues its payment to the second person on the contract. The monthly payment is the same before or after the death of the first beneficiary since it’s a joint contract. It is the perfect solution for an aging couple seeking for a secure source of revenues for both parties.
Joint Life Annuity Cost
As any other annuity contracts, joint life annuities cost is on a case by case basis. Depending on your age, your health and the amount invested, the payment will vary. The joint life annuity is obviously more expensive than a standard life annuity contract. The reason being the payments must not last during the life of a single investor but during the last of two investors. This increase significantly the life expectancy of the contract as it will only ends once both beneficiaries are deceased.
Joint Life Annuity Advantage
The main advantage compared to a stand life annuity contract is the possibility to cover two investors with the same contract with the same terms. It is usually cheaper (e.g. you will receive more money from your annuity) than purchasing two individual policies.
Joint Life Annuity Disadvantage
Joint life annuities might not be a good product for couples who have different income stream needs. If one spouse already benefit from an important pension plan, there may no need to add retirement income through an annuity. In this situation, the spouse without the pension plan is maybe better off with a single life annuity that will finish upon his death.
How Do I Know If I Should Go For a Joint or Single Life Annuity?
Finding the best contract and annuity rates is often a numbers game. You need to meet with an adviser that will run multiple scenarios and offer you the best value for your money. If you haven’t found an adviser yet, you can click on the following link to contact a trusted representative that will answer all your questions: