Annuities are Insurance companies’ investments products.
Return of Premium Riders
Under a refund or return of premium rider, the insurance company will return invested funds to the named beneficiary in the rider in the event that the annuity owner dies before the principal value of the annuity has been paid out. It effectively provides a cash refund that’s equal to the premium paid to the insurance company to establish the annuity, less benefit payouts made between the time the annuity begins and the owner dies.
For e.g. if you paid a $200,000 premium into an annuity, and collected benefits for 10 years totaling $100,000, then the remaining $100,000 will be paid to your beneficiary.
Naturally, the longer the annuity contract is in force, and the more principal is paid out, and the lower the death benefit will be. It is even possible that after 20 years or more have passed, that no death benefit will be paid out because the annuity has been depleted.
Disability, Unemployment & Terminal Illness Riders
These are the riders that relate to either your health condition or employment status. There is a rider customized for each situation.
A partial disability benefits rider pays benefits if your ability to earn a living has been impaired by a disabling event. Unlike a standard disability insurance policy, it does not provide benefits based on your actual employment earnings. Instead, it pays you a certain percentage of the monthly income payment that was agreed upon under your annuity contract. It usually makes these payments for certain specific period of time, which is generally not more than one year.
The rider may also include benefits for unemployment, though that can also be established as a separate rider. The annuity will pay you a certain percentage of your monthly income payment agreed upon in the annuity contract, for up to one year.
In either case, surrender charges will be waived.
A terminal illness rider will enable you to access a certain percentage of your annuity due to a health condition that leaves you with a life expectancy of one year or less. Within that time, surrender charges will be waived.
Guaranteed Minimum Accumulation Benefit Rider
A guaranteed minimum accumulation benefit rider (GMAB) is typically attached to a variable annuity, designed primarily to protect the annuity from declines in the contract value due to changes in the financial markets.
The rider guarantees that the minimum amount received will be the dollar amount invested in the contract, or the gain in the value of the contract, between the time that it is established and it begins making income payments.
There is some risk in taking this rider. The benefit will only occur if the value of the annuity falls below the guaranteed value. If it never does, the annuity owner will have paid for a benefit that will never be received. Some insurance companies have provisions within the rider that the cumulative costs of the rider is returned to the annuity owner, if the value of the annuity is higher than the guaranteed value. That is a stipulation that you will want to be certain is in place before adding this rider to your annuity.
Guaranteed Minimum Income Benefit Rider
A guaranteed minimum income benefit rider (GMIB) ensures a specific income payment regardless of the performance of your annuity since the contract is put in place.
Under a guaranteed minimum income benefit rider, your income payments are typically based on several essential calculations. For example, some of the calculations include:
• A payout based on a percentage of the annuity value
• The actual value of the annuity at the time that income payments begin, or
• The highest contract anniversary value of the annuity
Adding a guaranteed minimum income benefit rider is an important reason why an investor might choose an annuity over simply investing in a mutual fund. It means that the investor has an opportunity to have a higher value than what a mutual fund can provide, particularly in a poorly performing market. Source: Good financial cent.
Annuity Investment that can provide additional income and or benefit such as long-term care or to enroll in appropriate Medicare plan contact Sudhir Mathuria at 713-771-2900.