Life is a very difficult journey, that is often full of unpleasant surprises. A considerable part of the income often goes un-invested. Some insurance companies and investment companies have come up with some great investment instruments, known as annuities. Sometimes these annuities are also termed as life annuities, or simply as annuity.
What is Annuity?
There is no concrete definition of the term, annuity, and at times it is simply defined as a series of incomes or income from an investment, that has been made beforehand. Usually an annuity is an insurance, typically a life insurance policy with a fixed rate of premium that the policy holder has to pay to the company.
The annuity thus has two divided phases, namely, the accumulation phase, and the phase of repayment. During the accumulation phase, the policy holder makes periodic payments to the company during a specified number of years. The insurance company makes concrete investments of these payments in some reliable sources.
The second phase of the annuity, that is the repayment phase. In the repayment phase, the already paid money is returned to the policy holder along with a genuine amount of 'interest', that has accumulated over the number of years. This repayment can be done in two ways, first in a lump sum manner, or in a structured settlement. These returns that are paid over a certain period of time are termed as settlements. There are many factors in such policies, that are bound to differ, according to terms and conditions of the policy. However, basic working of this mechanism remains the same, and the motive of the policy is fulfilled, secured, assured and guaranteed returns over investments.
Annuity Settlement Options
The following are some simple and yet successful settlement options that can be used by people.
- Refund Life Annuity: It is probably the best and most suitable life annuity. The working of this policy is simple. The applicant of the policy/policy holder/annuitant, pays all the installments to the accumulation phase. After the maturity of the policy, the amount is repaid to the holder over a certain time period. The remainder of the amount is repaid to heir of the holder over a certain time period. The best thing about this policy is that there are no risks of losing money, which makes the policy a highly rated one.
- Joint Life Annuity: It is a great option that is basically a policy that has two holders. The working of this policy is quite similar to that of the refund life annuity, however in such a case there are two policy holders. After the maturity of policy, both the policy holders are repaid equal amounts over a certain time period. In case of death of a holder, the remainder amount is repaid to the other holder. This policy is suitable for married couples.
- Temporary Life Annuity: A temporary life annuity is also favorable one. In such a situation, the holder of the policy keeps on receiving the repayments till a specified period of time. The repayments, unlike other policies do not last till the death of the holder.
- No Refund Life Annuity: This policy is probably the most commonly observed one. A no refund policy means that refund lasts till the death of the policy holder.
While selecting a good policy, review its terms and conditions, and then have a look at your own requirements. Never forget to consider your family while finalizing the options for settlement of annuity.