What Is a Cash Refund Annuity?

A cash refund annuity returns to a beneficiary any sum left over should the person who purchased the annuity—called the 澳洲幸运5官方开奖结果体彩网:annuitant—die befor🍌e br🐼eaking even on what they paid in premiums.

Such a provision is typically included as a rider on a 澳洲幸运5官方开奖结果体彩网:life annuity (also known as a "pure life annuity" or "straight life annuity"🦹). It stipulates that if the annuitant passes away before the annuity payments received equal the annuity payments made, the annuity writer or insurance company will pay the difference to a named beneficiary, which is usually a spouse.

Typically, a cash refund annuity will cost the annuity buyer more in premiums. For the annuity writer—usually an insurer—it is a valuable tool for persuading individuals to buy an annuity. A cash refund annuity is also referred to as a "life with cash refund annuity."

How a Cash Refund Annuity Works

Annuitiesꦇ are used to guarantee a constant stream of income over a specified period of time. Depending on the annuity features, the payments will either stop when the annuitant dies or be paid as a death benefit to a beneficiary.

In a cash refund annuity, the annuity holder's beneficiary receives a lump sum. For example, assume a retiree purchases an annuity for $100,000 and receives $60,000 in annuity payments before passing away. The beneficiary, in this case, would receive $40,000 as a lump sum cash refund from the insurance company.

An installment refund annuity would return the $40,000 in payments over a period of time instead of a lump sum. Because of the 澳洲幸运5官方开奖结果体彩网:time value of money, a life annuity with an installment refund will generally pay a slightly higher guaranteed benefit to the original annuitant꧂ as compared to a life with cash refund annuity, wh🐭ich features a lump-sum payment.

Types of Cash Refund Annuities

A cash refund feature in an annuity can take many forms. For example, under a 澳洲幸运5官方开奖结果体彩网:Single Premium Immediate Annuity (SPIA), 🦩an individual may choose to structure their annuity as life with a cash refund or joint-l🌃ife with a cash refund.

In a life with cash refund annuity, payments are made until the annuitant dies. If any balance remains between the sum of the premium payments and the sum of the payouts, that remainder is paid to the annuitant's beneficiary.

A joint life with cash refund annuity works the same way, except that it continues to make payments until both named ind🏅ividuals die (usually both spouses), then will pay any leftover balance to a named beneficiary.

In such an annuity option, the payments due to the surviving spouse may 🥀be the same as if both spouses were still alive. The payments might also be lower if the annuity was structured to provide a greater payment while both spouses are alive at the cost of a lower payment after one spouse dies.