Installment Refund Annuity
What Does Installment Refund Annuity Mean?
An installment refund annuity is a type of annuity that includes a provision stating that if the annuitant does not receive payments equal to the total amount paid in contributions, the beneficiary will receive the difference in monthly installments. This provision is typically added as a rider to a life annuity. As a result, the annuity buyer will pay higher premiums, potentially extending even beyond their death. This provision helps mitigate the risk of the annuity being a poor investment and is an attractive option offered by many annuity providers and companies.
Insuranceopedia Explains Installment Refund Annuity
Annuities provide the insured with a guaranteed, consistent stream of income over a specified period. Various types of cash refund options are available to annuitants, each offering its own advantages.
The installment refund annuity ensures that, upon the annuity holder’s death, the beneficiaries receive the remaining balance of the annuity in installments. For example, if the annuity holder purchases an annuity worth $200,000 and only receives $60,000 in payments before passing away, the beneficiaries would receive the remaining $140,000 in installments. Due to the time value of money, a life annuity with an installment refund typically pays slightly more than other cash refund annuities that provide lump-sum payments.
