Could Your Spouse Receive a Fixed Indexed Annuity Death Benefit?
If you have an annuity or are thinking about getting one, you may be wondering about your annuity death benefit. Many people are concerned about where their money will go when they’re gone. The answer to this depends on several factors, which we will cover here. Let’s first define what a fixed indexed annuity (or FIA) is, and how it differs from other types of annuities.
Types of Annuities
Annuities come in three main types: Fixed annuities, variable annuities, and fixed indexed annuities, or FIAs. Annuities area always contracts between you and an insurance company. However, there are some important differences between these types of annuities. Firstly, each one offers a different interest rate. The interest rate set when you sign a fixed annuity contract, for instance, doesn’t change for the life of the agreement. A variable annuity, on the other hand, has a rate that changes with the ups and downs of the stock market. An FIA contract has a mixed approach to the interest rate. You get a minimum guaranteed* interest rate, but you also get the chance for a reasonable rate of return.**
Additionally, annuities vary in terms of their risk. Fixed annuities tend to offer the lowest risk, and as a result, have the lowest interest rate. Variable annuities, meanwhile, link to the stock market. This means they carry a higher risk. FIAs, though, allow you to get a contracted interest rate, but also tend to let you earn more on your money. Annuities also differ in their available death benefit options.
Possible Death benefit of FIAs
You decide what will happen with your money when you die with an annuity contract. Some products don’t come with an annuity death benefit, Some make payouts to your spouse or beneficiaries. With an FIA, for instance, there’s an accumulation phase and a distribution phase, and if you die during either of these phases, the money doesn’t have to be paid to your estate. Instead, it can go to your spouse or another family member. This way, you can avoid probate. This could save family members both time and money in court. Additionally, you might be able to select how your loved ones actually receive your money upon your death. Some FIAs, for example, will allow you to pay your beneficiary with monthly or annual payments. You may also have the option of your money going to your designee in one lump sum. Lastly, you might have choices that allow your payments to be provided for the rest of your beneficiary’s life.
Annuity Death benefit Options
What happens if you pass away before your annuity payout begins? Well, many plans offer an annuity death benefit to the person or persons of your choice. This type of benefit often comes in a lump sum, but if your annuity is a “joint life” annuity, you could potentially lock in your husband or wife’s income after you’re gone. In this situation, your spouse continues to receive monthly payments for life. The amount your spouse gets depends on the choices you make at the time of contract. You might choose to have your spouse receive the same amount you did when you were alive. Additionally, some annuities give you the chance to assign a third beneficiary. This way, if both you and your spouse pass away, a third party can receive the money.
We’re here to help answer any questions you may have about FIAs or the death benefits of annuities in general. Reach out to us to schedule a no-obligation meeting, or attend one of our upcoming events.
*Backed by the claims-paying ability of the carrier.
**Reasonable rate of return over time.