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Phil Cannella explains that there are a lot of different types of annuities on the market being offered by many different insurance carriers. Each insurance carrier tries to package their annuity in a different way to make it more attractive to a consumer. One particular type of annuity as Phil Cannella explains is the Life Annuity with Period Certain.
Understanding this annuity it is important to understand annuities as a whole says Phil Cannella. When an insurance carrier makes a guarantee to provide a certain income stream to an annuitant, it is doing so on the basis that it is using the monies you have given the insurance company over time and the insurance company is using that money to make money for itself. The insurance company is after all a business too says Phil Cannella.
In a life only annuity, the insurance company pays the annuitant a set income stream for the duration of his or her life. If the annuitant lives longer than expected payments continue, if shorter then expect, the carrier keeps the money. In the life annuity with period certain, as Phil Cannella explains, the company pays income for as long as the annuitant lives and guarantees to make payments for a set number of years even if you die. This period certain is usually 10 or 20 years. If you live longer than the period certain, you’ll continue to receive payments until you die. If you die during the period certain, your beneficiary gets regular payments for the rest of that period. If you die after the period certain, your beneficiary doesn’t receive any payments from your annuity. Because the “period certain” is an added benefit, each income payment will be smaller than in a life-only option.
Phil Cannella urges any consumer who is interested in an annuity to really understand the products available before making a decision to get one.