Other Types of Annuities

Just as life insurance may be offered under various types of contracts, so annuities may assume a variety of forms to cover the needs of different persons. Special attention should be called to the following:

Annuity contract guaranteeing a minimum number of annuity payments. Such contracts may provide, for example, that in return for a given cash payment an annuity of say $100 shall be paid during the lifetime of a designated person, but that irrespective of the death or survival of said person, at least ten payments must be made. It should also be noted that an immediate annuity may be made to provide that in the event of death the company shall pay "a proportion of the annual sum, based upon the number of months which-have elapsed since the last annuity was paid". Thus, if the annual annuity payment is $1,200 and if death should occur ten months following the last payment, the company will pay $1,000 or ten-twelfths of the annual payment. This arrangement, it is argued, "allows the annuitant to live up to his income, for should his death occur shortly after the regular annuity payment he would have on hand the expended balance of his annuity, while, should his death occur ten or eleven months after the regular annuity payment, the pro rata paid by the company would aid in extinguishing such debts as would otherwise remain unpaid".

Deferred annuities. As the name suggests, a deferred annuity is not payable to the purchaser immediately, but only upon his surviving a stipulated period. To illustrate, a man 35 years old may decide to save a portion of his earnings each year with a view to providing for himself twenty years from date an annual income of $1,000 payable in semi-annual installments of $500 each, the first installment of $500 to be paid when he becomes 55^ years old. This he can do by paying to the company, whose rates were previously quoted, $429 a year for twenty years.

Such an annuity may be paid for in a single sum, on the limited payment plan, or by yearly premiums throughout the period of deferment. It may appeal to persons who wish to utilize their productive years to accumulate a fund for the purchase of an annuity at an age when their income-earning capacity will have declined or ceased. There is usually no refund of the premiums that may have been paid in case the annuitant should die before the first installment of the deferred annuity becomes payable. Occasionally, however, deferred annuities are made to provide for a return to the annuitant's executors, administrators, or assigns of all premiums in the event of his death before the annuity payments begin.

Last-survivor annuities. Annuities may also be issued upon the lives of two persons, the payments to be made to them jointly while they are both alive, and to continue for the full amount during the lifetime of the survivor. While this plan may be applied to three or more lives, such instances are very few as compared with two-life annuities. This plan may prove very advantageous to two sisters, or to a husband and wife who have no children or whose children are financially prosperous, as a means of providing an adequate and regular income not only during their joint lifetime but also during the lifetime of the survivor of the two. Thus a husband aged 55 and his wife aged 50 may have an annual income of $1,000, for as long as either may live, guaranteed to them by the aforementioned company upon the payment of $18,337.