Life Annuity, Guaranteed Period Annuity and Annuity Certain

The income to the investor in an annuity can come in two different ways. It can start immediately after the plan starts or it can start on a date chosen by the investor as per his requirement. The former is called an immediate annuity pan and the latter, a deferred annuity plan. There are some annuities in which the income is paid till the time one lives, or in another version, it is paid for a fixed period of time, or in some cases, payment is received by the family even after the death of the owner of the annuity.

There are some restrictions on withdrawal of the money once the payment of the annuity starts. In some cases, the money cannot be withdrawn from the account, once the payout period starts. In some other plans, the money can be withdrawn, but there are some penalties imposed for such withdrawals. Broadly, the manner in which the income can be distributed may be categorized in the following ways.

Life Annuity

In life annuity, the investor is guaranteed with specific amount in his entire life. But after the death of investor the annuity payment also ceases. It can be single life annuity, joint life annuity or joint and survival annuity. The single life annuity provides income benefits for one person only, whereas in the joint life annuity, also called joint and survival annuity, which is issued on two persons, the income from the annuity continues till both the members covered by the annuity die.

Guaranteed Period Annuity

The guaranteed annuity is very similar to life annuity; in which investor receives specified income for his entire life but it also has one added advantage. If the investor dies, his beneficiary will be paid for certain number of years, say 10, 15 or 20 years as decided by the plan owner. If the person dies prior to this period, the payment will continue till the specified period. If he lives for more than the specified period mentioned in the plan, he will still be entitled for payment for his entire life. Obviously any annuity, which guarantees income for both the investor and his beneficiary, can be purchased at a higher premium. There are variations available in this plan, in which either the full benefit, or two-third benefits or half benefits can be extended to the beneficiary.

Annuity Certain

In this type of annuity certain amount of annuity is paid for a fixed period. Once that period is completed the payment stops, irrespective of the fact that whether investor is dead or alive. If the investor dies before the assigned period then the amount left is paid to his nominee. The period of such annuity is generally 10 years. Because of the level of certainty in the plan, the level of payment is higher in this case as compared to the life annuity.