Understanding the Death Benefits of Fixed Annuities
The Death Benefit guarantees that, if your assets should outlive you, your annuity insurance company will pay out at least the original amount of your annuity. There are a few different kinds of death benefits will be defined below. But, be aware some may come with an added fee.
Standard Death Benefit. This is the "least generous" annuity option, but generally comes without any extra fees. It could be fixed as soon as your insurance company receives proof of the owner or annuitant's passing, or it could fluctuate until one of the named annuity beneficiaries files a claim.
Return of Premium Death Benefit. In this case, the annuity contract offers your annuity beneficiaries either the contract’s current market value of the sum of all the annuity contributions (as in the interest on the annuity), whichever one is the larger amount. This one usually comes with a fee.
Stepped-Up Death Benefit. With this option, the insurance company monitors and records your annuity contract’s balance annually on the purchase date. Your annuity beneficiary will receive the highest of those annual values. This option comes with a fee.
Considering what will happen with your annuity if you pass away before the payout date is not pleasant, but understanding the different death benefit options and how they work will unsure that you make the right choice for those you leave behind.