What is an Annuity?
An annuity may be defined as periodic payments made during a fixed period or for the duration of a designated life or lives. In the purest sense, a life annuity may be defined as a contract whereby, for a cash consideration, one party (the insurer) agrees to pay the other (the annuitant) a stipulated sum (the annuity) periodically throughout life.
Purpose
The purpose of an annuity is to protect against a risk – outliving of one’s income – which is just the opposite of life insurance which provides protection against dying before our obligations are met.
An annuity provides no life insurance protection; it is simply an accumulation and distribution of cash to provide income, possibly on a tax-deferred basis. The annuity has liquidation of a sum of money as its basic function while life insurance is bought to create a sum of money at the death of the Insured.
Annuity with Long Term Care Rider
When planning for retirement, we often think about protecting our assets from market volatility, taxes or inflation, but there’s also an increasing need to consider the potential effect of long-term care costs. There’s a high likelihood that you’ll need some sort of long-term care in your life. It can be expensive, and if you don’t have an adequate strategy to cover such costs, your assets could be rapidly depleted.
Long-term care services include a broad range of health, personal care, and supportive services that meet the needs of people whose capacity for self-care is limited due to:5
• A chronic illness
• Injury
• Physical, cognitive or mental disability
• Other health-related conditions
Some common long-term care services include:
• Help with eating, dressing or bathing
• Housework
• Preparing and cleaning up after meals
• Physical therapy following an injury
• Administering medications