Could your spouse receive a fixed indexed annuity death benefit? If you’re thinking of purchasing an annuity or already have one, you may be wondering about your annuity death benefit. Many people are concerned about what happens to their money when they die. The exact answer to this depends upon several factors. we’ll discuss those factors here. Firstly, let’s define what a fixed indexed annuity (or FIA) is. Specifically, how it may vary from other types of annuities.
Types of Annuities
For clarification, annuities tend to come in three types. Fixed annuities, variable annuities, and FIAs. These annuities are all contracts between you and an insurance company. There are, however, some key differences between these three types. Firstly, each offers a different interest rate. The interest rate set when you sign a fixed annuity contract doesn’t change for the life of the agreement. Conversely, the rate of a variable annuity changes as the market goes up and down. A fixed indexed annuity, finally, has a mixed approach to the interest rate. You get a minimum guaranteed interest rate, but you also get the chance for a reasonable rate of return over time.
Annuities also vary in terms of the amount of risk. fixed annuities tend to offer the lowest risk, however, they have the lowest interest rate. Variable annuities link to the stock market, typically allowing for a higher interest rate, but also come with higher risk. Lastly, fixed indexed annuities offer you a contracted interest rate flor, but also let you earn more on your money.
Annuity Death Benefit Options
At the time of the annuity contract, you decide what will happen with your money when you die. With some products, there’s no annuity death benefit at all. However, some make payouts to your spouse or beneficiaries. Often, this type of benefit pays in a lump sum. IF your annuity is a “joint life” annuity, however, you could potentially lock your significant other’s income after you are gone. In this situation, your spouse continues to receive monthly payments for life.
The amount your spouse gets depends on the choices you make at the time of the contract. You might choose to have your husband or wife get the same amount you did when you were alive. You could choose to have the spousal payment be a little less. Furthermore, some annuities give you the chance to assign a third beneficiary. This way, if both you and your spouse pass away, the money can still go to a third party.
Fixed Indexed Annuity Death Benefit
With an FIA, there are two stages. An accumulation phase and a distribution phase. If you die during either of these phases, you don’t have to pay your estate the money. Instead, you can leave it to your spouse or another family member. Therefore, you have probate. This could save your family members time and money in court.
If you have questions about death benefits of FIAs or annuity death benefits in general, we can answer them. Reach out to us to schedule a no-obligation meeting, or attend one of our upcoming events, so that we can help you further understand annuity death benefits.