There are a few different options for annuities and an immediate annuity is one.

This is an insurance policy that guarantees that in exchange for a sum of money the person will make regular scheduled payments.  These payments may be level or increasing periodic payments for a fixed term of years or end of lives.  It is also possible to structure the payments under an immediate annuity so that they vary with the performance of a specified set of investments.

A life immediate annuity is used to provide an income similar to a pension plan.  It works somewhat like a loan.  This can reduce the problem faced by people as they don’t know how long they will live, so they don’t know how quickly to use their savings.

The annuity can have a benefit rider to cover a spouse, family member or friend also.

Life annuities are priced based on the probability of the person surviving to receive the payments.

Longevity insurance is a form of annuity that defers the commencement of payments until later in life.  A common longevity contract would be purchased at or before retirement but would not commence payments until 20 years after retirement.  If the person dies before payments commence there is no payable benefit.

This last route drastically reduces the cost of the annuity while still providing the person with protection against outliving their resources.

John M. Bulbrook is founder and CEO of Bulbrook/Drislane Brokerage, a national distributor of financial products headquartered in the Boston area.  For more than 30 years John has helped insurance agents, financial planners and brokers find the right insurance and annuity products to meet the client’s needs.  In the process, he has earned a reputation throughout the industry for his integrity, resourcefulness and hard work, all carried out in good humor.