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What is a Life Insurance?
Life insurance is bought by someone in order to protect his or her family in case of death. This may be mainly bought by people who are the sole breadwinners of the family: without that money in the event of that person's death, the family couldn't survive. However, not many people truly know how life insurance policies work. Many people don't believe they can afford any life insurance and a few see it as an unneeded cost.
Purchased life annuity
Also known as an immediate annuity, this type of contract provides, in return for a single premium, an annual payment starting immediately and continuing for the rest of the annuitant’s life.
Annuities can be on a single life or joint lives, most usually husband and wife. These policies are particularly popular for retired people who want a guaranteed income for as long as they live. They may be bought with the tax free cash available from a personal pension on retirement.
Where an annuity is being used to provide retirement income for a married couple, it would not be advisable to have a single life annuity, because if the annuitant died first, payments would cease and the surviving spouse would be left with nothing. This has led to joint life last survivor annuities. These contracts pay an annuity for the joint lifetimes of the two annuitants. Payments usually continue in full after the first death, but sometimes reduce by a set amount, say a third.
Purchased life annuity
Also known as an immediate annuity, this type of contract provides, in return for a single premium, an annual payment starting immediately and continuing for the rest of the annuitant’s life.
Annuities can be on a single life or joint lives, most usually husband and wife. These policies are particularly popular for retired people who want a guaranteed income for as long as they live. They may be bought with the tax free cash available from a personal pension on retirement.
Where an annuity is being used to provide retirement income for a married couple, it would not be advisable to have a single life annuity, because if the annuitant died first, payments would cease and the surviving spouse would be left with nothing. This has led to joint life last survivor annuities. These contracts pay an annuity for the joint lifetimes of the two annuitants. Payments usually continue in full after the first death, but sometimes reduce by a set amount, say a third.
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