Learn the Basics of Pure Life Annuities

If you're looking for a steady stream of retirement income, you may have heard about a pure life annuity. You may be familiar with annuities that provide a steady stream of income after funding an account, but pure life annuities function in ways that may be more (or less) advantageous to your financial future. It all depends on your specific circumstances.

Now, as with any type of financial decision-making, speaking with an independent insurance agent can help you make the right decision when it comes to your retirement. Independent insurance agents offer non-biased and expert guidance, explaining the difference between various insurers and investment products.

Be sure to make note of any questions you may have while reading this article to gain a clearer perspective on what you're looking for.

What is a Pure Life Annuity?

A pure life annuity is a type of annuity that provides guaranteed periodic payments until your death. They are commonly used to provide a guaranteed income that continues for life. When you die, payments cease though they may continue to pay out to a beneficiary depending on the options you select.

Pure life annuities can be thought of as longevity insurance, and in many ways, they’re the opposite of a life insurance policy. While life insurance protects your family if you die early, a pure life annuity protects you and your family if you live too long.

How Does a Pure Life Annuity Work?

A pure life annuity is paid for in installments over a period of time or in a single lump sum payment just like other annuities. When purchasing a conventional annuity, there are only three things you need to decide:

How much you want to invest
The size of the payments you want to receive
The length of time you want to receive them

Pure Life Annuity Settlement Option Definition

Once you've determined how much you want to invest, the size of the payments, and the length of time you'd like to receive payments, it's important to consider settlement options for a pure life annuity. Because of the wide variance in annuities, choosing a pure life annuity settlement option modifies how the principal of the account is distributed after the policyholder dies.

Pure Life Annuity Settlement Options

Considering that most pure life annuities cease payment at the death of the policyholder, you should discuss some of the following settlement options with an independent insurance agent.

Settlement Option	Definition
Joint And Survivor Annuity	Payments are made until both named individuals of the annuity (owner and beneficiary, usually a spouse) are dead. For families with a single breadwinner, this settlement option is ideal to maintain a spouse’s quality of life after the policyholder passes away.
Life Plus Period Certain Annuity	This settlement option provides the option of paying a benefit for either a) annuitant's lifetime, or b) for a specific period of time, whichever is longer. By choosing this settlement option, account holders have certain guarantees if they believe they might outlive their retirement income.
Cash Refund Annuity	Guarantees that a spouse/beneficiary will receive a sum equal to the premium paid into the annuity should the annuity owner/annuitant die before breaking even. Bear in mind that this settlement option pays out a sum minus the total payments already made.
Lump-Sum Settlement	For this option, the policyholder or beneficiary would receive a payout of all of the original capital plus earnings. While this settlement option helps recoup an investment that would otherwise be lost, recipients of the lump-sum will be responsible for significant tax liability which can result in a higher tax bracket and other financial repercussions.
Installments of Designated Amounts	A predetermined amount is paid every month until the annuity’s account is empty, at which point no other payments will be made.
Investment Income	This settlement option leaves the principal untouched, with only payments of the annuity’s income are paid out. When the policyholder dies, the principal is paid out in a lump-sum to a beneficiary. Installments of designated amounts are designed to be more advantageous to the survivors than the client, similar to a living trust.

Who Buys a Pure Life Annuity?

The simple answer is a person or couple with no dependents who want a stable, guaranteed income for life.

Since payments from a pure life annuity with no guaranteed or joint options stop when you die, this makes it less expensive than other types of annuities. It will also provide the highest monthly payments. So this type of annuity may be the optimal choice for a single person or a couple with no dependents.

Adding guaranteed or joint options will reduce the monthly payments or increase the initial cost, but these options make a pure life annuity more sensible for someone with a spouse or dependents.

There are two other less common situations where pure life annuities may make sense for you:

Life insurance for those who can’t buy life insurance due to health reasons. Since an annuity is an investment contract rather than a life insurance policy, your health issues don’t matter. You won’t be turned down even if you have a terminal disease. Purchasing a pure life annuity with a guaranteed option for your heirs can substitute for a life insurance policy in a situation like this.
It can be used as a substitute for a long-term care policy. Long-term care policies can be expensive, especially as you get older or if you have preexisting medical conditions. Riders can be added to a pure life annuity that provide some level of long-term care coverage.

How Much Does a Pure Life Annuity Cost?

Calculating the cost of a conventional annuity is fairly simple and many calculators can be found online. But exercise caution with these calculators. They offer only average or “typical” costs, or only prices from the company providing the calculator.

Calculating the cost of a pure life annuity isn’t as simple as a conventional annuity because your age, gender, and other factors come into play. The best way to find out what a pure life annuity will cost is to contact an independent insurance agent who can assess your individual circumstances, find the best annuities for you, and provide exact costs.

What Is Another Term Used for a Pure Life Annuity?

One common question about these types of annuities is: "Are pure life annuities known by other names?"

Yes. Pure life annuities may be referred to as a straight life annuity, a lifetime payout annuity. or simply a life annuity. They can also be known by other names when options are added. For example:

Guaranteed annuity: This will continue to pay a beneficiary after your death.
Joint annuity: This will continue to pay your spouse after your death (or vice versa).

Regardless of what they’re called, they’ll always have the word “life” in them.

Where Is the Best Place to Buy a Pure Life Annuity?

Our vast network of independent insurance agents can provide you with a large selection of annuity products including pure life annuities. This is a benefit you won’t get from a single insurance company or investment firm.

Why Choose an Independent Insurance Agent?

Independent insurance agents simplify the process of shopping for and comparing annuities. They will explain the complex terms for you, cut through the jargon, and make sure you understand the fine print.

But perhaps most importantly, they work for you — not one insurance company. They can compare annuity products from many companies and pick the ones that are best for you at the best possible price.

They’ll also be there for you in the future if your needs change or questions arise. They work for you, and their only job is keeping you satisfied now and in the future.

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