Annuity riders are amendments to your annuity insurance policy. These riders can help to expand your policies benefits. In this article, we will go over several of the most common annuity riders and what they can do for your coverage.
Long-Term Care Rider
Typically, long-term care riders can be added onto fixed deferred annuities. They do not provide you with long-term care coverage. But if you ever need long-term care, either in home or nursing home, your rider will provide you with more income to help you cover the added cost of long-term care. Some riders will double your monthly payment, allow you to access more of your accumulated value or both.
Cost of Living Rider
Many fixed annuities have cost of living riders that you can add on to them. This rider will raise the monthly income you receive by a set percentage every year to help your payments keep up with inflation. However, you typically will receive lower than average monthly payments for the first few years.
With an immediate annuity, you can add on a refund rider. When you pass, if the total amount of annuity payments you receive are less than the amount you paid in, your beneficiaries will receive the difference. There are two types of refund riders: cash and installment. The cash refund is a lump sum payment to your beneficiaries, whereas the installment refund will pay your beneficiaries the difference in installment payments.
Refund Risk Rider
If you have an illness that greatly reduces your life expectancy and you want to purchase an immediate annuity, you may want to add on an impaired risk rider. This annuity rider will give you larger monthly payments due to your shorter life expectancy.
Commuted Payout Rider
A commuted payout rider attached to an immediate annuity allows you to withdraw a lump sum from the annuity should the need arise. This amount is usually limited to a certain percentage or a fixed dollar amount.
Choosing Your Annuity Riders
The exact term of annuity riders will differ from company to company and even policy to policy. Due to this, it is very important that you are aware of the exact terms of the riders. This would include any restrictions involved. It is also important to note that there are typically added costs associated with riders. A qualified financial planner and an insurance agent can help you to navigate your choices and choose the right rider or riders that are right for you and your situation.
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