Annuity Riders and Waivers
An annuity can make payments for as long as the annuitant lives and also protects the owner or annuitant from outliving their money. Annuities also offer many riders and waivers for policies owners to enjoy and use at their discretion.
Guarantee Income Benefit Rider(s)
These riders are usually attached to variable and index annuities. This value can grow from 5-8% compounded on a yearly basis. After deferring your annuity for period years, you may access this value and the payments will be made based on your age. The older you are the higher the payout percentage. It is important to keep in mind that your account value is still subject to market risk if you have variable annuity.
Return of Premium Rider
A return of premium rider (ROP) will refund any paid premiums you made into an annuity less any withdrawals to you without incurring a surrender charge. The rider will effectively negate any possible surrender charges and gives the client and the agent a reason to meet every year and discuss whether to keep the annuity or move the money somewhere else.
Long-Term Care Riders
A Long-Term Care rider provides long term care insurance in addiction to a steady stream of income. The 2006 Pension Protection act now allows for withdrawals from an annuity or life insurance policy with a long term care rider to be tax free to the individual for qualified long term care expenses.
Please Note
Applies to non-qualified money Your money is used first May be accessed after the 2nd year All of the money has to be used within six years
Waivers
All annuities offer waivers where you can take your money out of the annuity without incurring a surrender charge or penalty.
Death Benefit Waiver
When the owner dies, the beneficiary receive the payment or payout from the annuity
Nursing Home Waiver
Annuity holders will not be charged a surrender fee when the client enters a nursing home. Most contracts allow for this rider to be exercised after the first year and the Dr. will have to sign off on the paperwork
Terminal Illness Waiver
If you become terminally ill, the policy will allow you to surrender the policy early without a surrender penalty. Again, your Dr. will have to submit paperwork to the insurance company but you will be able to access your money.
Bailout Feature
Some fixed and fixed index annuities offer a bailout feature. The feature allows you to terminate your contract if the insurance company lowers their interest rate or caps below a threshold. An example of this would be a provision where the bail out rate is specified to be 1% below the current rate being offered. If the contract renews 1% or more below the original rate, the client may move the money without a surrender charge.
Robert Eldridge holds over a decade of experience as a multiline agent/wholesaler in multiple states and currently serves on the membership council of the National Association of Insurance and Financial Advisors.
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