Principles of Risk Management and Insurance, 13th Edition

Summary

• An annuity provides periodic payments to an annuitant, which continue for either a fixed period or for the duration of a designated life or lives. The fundamental purpose of a life annuity is to provide lifetime income that cannot be outlived.

• A fixed immediate annuity pays periodic income payments to an annuitant that are guaranteed and fixed in amount. A fixed annuity can be purchased so that the income payments start immediately, or the payments can be deferred to some later date. Deferred annuities typically provide for flexible premiums.

• Annuity payout options typically include the following:

  • – Cash

  • – Life income (no refund)

  • – Life income with period certain

  • – Installment refund option

  • – Inflation annuity option

  • – Joint-and-survivor ...