In simplest terms, an annuity is any stream of fixed, periodic payments over a specific time period. An example of annuity payments: when an individual wins a lottery jackpot and elects to take annual payments over a period of several years (generally, the term is 20 years). In the past, most annuities came from paid-up life insurance policies.
Today, there are several different types of annuity payout arrangements, some of which provide a guaranteed income for life and others that are for a specified period.
An example of the former type of annuity is known as a “life annuity.” Similar to a defined benefit plan or pension, this is meant to provide an income for the remainder of a person’s natural life. Most of these annuities do not actually pay up until the insured’s death, but do pay up until an advanced age, for example, 90. As more people today live much longer, the number of insurance companies that offer life annuities has decreased; only three major insurers in the U.S. currently offer life annuity plans.
During the early 20th Century in most of the industrialized world, this is how most workers who had the means financed their retirement. The insured would pay the insurance company a single lump sum. Annuity payments were given back in regular installments over a period of time; however, if the insured died prematurely, his survivors would receive a death benefit.
An annuity with period certain is one that pays out over a fixed period, for example, 20 years. The problem here is the possibility that the beneficiary will outlive the term of the annuity; thus, persons in good health who expect to live well beyond retirement may find this to be less desirable as a retirement plan.
CBC Settlement Funding can provide you with a lump sum cash advance for all or part of your structured settlement or annuity. Contact us today for more information on customized cash options to fit your financial needs.