If you have a
medical
condition or
disability that
may shorten
your life
expectancy, you
may qualify to
receive
immediate
annuity
payments that
are larger than
standard
payments.
Optional benefits/riders are available for an additional fee and are subject to contractual terms, conditions and limitations as outlined in the disclosure document and may not benefit all investors.
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Get More Income from an Impaired Risk Immediate Annuity
Having enough income during retirement is a challenge and concern for most
retirees. Immediate annuities offer a retirement planning option by providing a
guaranteed income. (Payment guarantees are based on the claims-paying ability of
the annuity issuer). In exchange for the payment of a single, lump-sum premium
to an insurance company, you receive a stream of payments for either a fixed
period of time (such as ten years) or for the rest of your life. The amount of
each payment depends on the premium paid, your age, gender, and whether the
annuity is for an individual or a couple. If you have a medical condition or a disability that may shorten your life
expectancy, you may qualify to receive immediate annuity payments that are
larger than standard payments. Known as a medically underwritten immediate
annuity, an impaired risk immediate annuity, or a substandard immediate annuity,
this annuity lets you benefit by either reducing your premium for a specific
stream of payments or by receiving larger payments for the same premium.
Get more income for your premiumOrdinarily, before an insurance company establishes the amount of the annuity
payments it will make to you, it first must estimate how long it will have to
make those payments. To project the length of time payments are expected to be
made, companies refer to actuarial tables that project the life expectancy of a
person of your particular age and gender. But if you demonstrate to the company,
primarily through your medical records, that due to a health impairment your
life expectancy is shorter than the actuarial projection, then the company
projects that it will make payments over a shorter period of time. Since it
anticipates making fewer payments, the company can make higher payments for the
same premium, or it can make the same payments for a smaller premium.
Some qualifying medical conditionsThe following are examples of health conditions that may qualify for medical
underwriting. The list has been compiled from various companies offering
impaired risk annuities. It is not intended to be an exhaustive list.
Alzheimer's |
Diabetes |
Muscular
Dystrophy |
Alcoholism |
Heart Attack,
Heart Disease,
Angina |
Obesity with Complications |
ALS (Lou Gehrig's Disease) |
High Blood
Pressure |
Organ Transplant |
Angioplasty or
Heart Surgery |
Hodgkin's Disease |
Organic Brain Syndrome |
Cancer (except
basal cell) |
Injury Due to Falls
or Imbalance |
Paraplegia or
Quadriplegia |
Chronic Hepatitis/
Hepatitis C |
Leukemia |
Parkinson's
Disease |
Congestive Heart
Failure (CHF) |
Liver Disease |
Renal Failure |
Cirrhosis of the
Liver |
Mental Illness |
Stroke |
Example:
A 70-year-old man pays $100,000 as a lump-sum
premium for an immediate annuity and receives $861 per month ($10,332 per year) for the rest of his life (life only option). But if he has a health condition (such as heart disease or diabetes) that changes his
actuarial age to 75, his distributions increase to $1,003 per month ($12,396 per year) for the same $100,000 premium. As an alternative, he can reduce his single premium payment for a life only option from $100,000 to $85,865, and receive the original payout of $861 per month. Note:
This hypothetical example is for illustration only and does not
reflect actual insurance products or performance, nor is it intended to promote
a specific company or product.
Some additional featuresImpaired risk immediate annuity payments are almost always for life only, meaning
the payments will continue as long as you live, but will end at your death. A
few impaired risk immediate annuities include a return of premium rider
(available at an additional cost) that ensures that if you don't live long
enough to receive the return of your premium payment, your beneficiary will
continue to receive payments from the company until the total of all payments
made equals your premium payment. As with ordinary immediate annuity payments,
impaired risk immediate annuity payments generally do not change once they've
begun. However, some companies offer impaired risk immediate annuities with an
inflation rider (available at an additional cost) that increases the payments by
a predetermined percentage each year.
Qualifying for an impaired risk annuityIn general, the issuer must determine that you have a demonstrable health
condition that can result in a life expectancy that is shorter than normal. Most
insurance companies that offer impaired risk annuities require that you provide
medical information to document your health condition. Medical records and
reports from your doctors and any facilities from which you receive treatment
for your health condition are often all that is required, although some issuers
may request an examination or interview with the company's doctor.
Why should you buy an impaired risk immediate annuity?
- The payments are larger than standard immediate annuity payments.
- You can get standard immediate annuity payments for a premium that is less than
the cost of a standard immediate annuity.
- It can provide a guaranteed* income for the rest of your life, regardless of
changes in interest rates, fluctuations in market performance, or increases in
inflation.
- The income stream can be used to pay long-term care or life insurance premiums.
- The certainty of a guaranteed* income may allow you to assume more risk in
allocating other assets for greater growth potential.
- You can use the increased income to make charitable donations or gifts to
grandchildren for education.
- If you can't qualify for long-term care insurance, yet face prolonged costs for
such care, the increased payments offered by an impaired risk immediate annuity
can be used to pay for some, if not all, of these medical expenses, preserving
some of your other assets for your estate.
- A portion of your payments may not be subject to income tax. Each immediate
annuity payment is part nontaxable return of your investment in the contract and
part payment of accumulated earnings (until the investment in the contract is
exhausted). Generally, only that portion of each payment that represents
accumulated earnings is subject to income tax.
*Payment guarantees are based on the claims-paying ability of the annuity
issuer.
Is an impaired risk immediate annuity right for you?Immediate annuities, including impaired risk immediate annuities, require that
you relinquish control over a lump sum of money in exchange for a steady income.
Before buying an impaired risk immediate annuity, you may want to be sure you
have other savings available to cover unexpected expenses that may arise. Also,
some impaired risk immediate annuities offer payments only for the duration of
your life. While you won't outlive the payments, you could die without receiving
at least the return of your investment in the annuity. Weigh the advantages of
the impaired risk immediate annuity against the potential drawbacks to determine
if it's the right choice for you.
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