Our clients often ask what happens to any remaining principal in their account at death. The answer depends on how the annuity is set up. We see most of our policies created with either a Cash or Installment Refund feature. This simply means that all remaining funds will transfer to the named beneficiaries at passing. The insurance company does not keep your money.
With a Cash Refund, the remaining funds in the annuity account are paid to your beneficiaries in a lump sum at passing. An Installment Refund continues the income stream for the established time period. If, for instance, the insured passed away in year 15 of a 20 year payout, the remaining 5 installments would be distributed to the account beneficiaries over 5 years.
It’s important to note that payments might be a little smaller when these features are added, but our clients like the peace of mind these riders provide. It’s not a requirement that you add a refund option, however. When maximum income is desired, our clients choose a Life Payment Only option. This strategy offers the largest payments but ends when the insured(s) have passed away. There are no refunds at death. This strategy is more appropriate for someone who needs more income and is less concerned with leaving an inheritance.
Traditional fixed annuities are considered to be some of the safest accounts available. There are several rules and regulations insurance companies must abide by to offer these policies. Large state Guaranty Associations exist in every state to insure deposits for policy owners. That being said, it’s always wise to research the rating and reputation of the insurance companies you are most interested in. We can help you find a stable company who will deliver on their promises.