Health Adjusted Annuities

Did you know that if your health profile is not good, you can actually get more income form annuities? Indeed, as strange as this may sound, there is a type of annuity that does just that.  Called health-adjusted annuities or medically-underwritten annuities, these contacts account for the shorter life expectancy of ill health.

For decades now, single premium immediate annuities have served people with a life long fixed income and they continue to remain popular. All you need to do is choose the 'life' option, and you secure a life-long income; almost like an additional social security check. The amount of your monthly payment is decided upon by the issuing annuity company. This is done by taking into account factors like standard life expectancy for your age, the amount you invest and existing annuities rates. The annuity payment made to you remains fixed, irrespective of how long you live.

Now, here's how your health profile can affect the outcome on the income that you receive. Some insurance companies also account for your individual health history. As typically, some illnesses are believed to reduce life expectancy, this makes a difference in immediate annuities. If you suffer from health conditions that affect life expectancy, you will receive higher monthly payments (i.e. because the insurance company does not need to pay you for as long, they will pay you more per month). Needless to say, you may in fact experience a normal life expectancy and simply enjoy the larger payments, irrespective of how long you live.

Here's an example, just to illustrate medically-underwritten annuities.

At the age of 75, Mr. George opts for a single premium immediate annuities. For a deposit of $100,000 that he chooses to make in immediate annuities, the insurance company will pay him $803 monthly. This fixed income will reach his bank account every month, irrespective of how long he lives.

As explained in the beginning, if Mr. George's health profile is not so great, insurance companies will reduce his life expectancy to 10 years and he will receive, in our example, an annuity payment of $1300.  The insurance company anticipates paying him for a shorter period and will thus provide him a larger payment.

Of course, the typical issues must be considered whenever considering immediate annuities. Before opting for immediate annuities, you must also take into account your family and personal relationships. Would you like to leave behind some of your wealth? In that case, think carefully before you opt for single premium immediate annuities, as these cannot be surrendered later for liquidity. But do remember, that a regular monthly income can help you remain independent for as long as you live. You could choose to use part of your wealth to secure your future, while leaving behind other fixed assets for your younger loved ones.

To get a quote on the annuity income that you could possibly receive from single premium immediate annuities, get in touch with an insurance agent or financial advisor. These experts could help you arrive upon an approximate figure of the annuity payment. Occasionally, the annuity income, although only partially tax free, could exceed the after-tax income received from other products like municipal bonds.