Installment Refund Annuity

Definition - What does Installment Refund Annuity mean?

An installment refund annuity is a type of annuity that comes with a provision that indicates that if the annuitant does not get payment equivalent to the price paid on the contribution, the beneficiary receives the difference in monthly installments. This provision is included as a rider on a life annuity. Thus, it will cost the buyer of the annuity more premiums even into his or her death. This provision reduces the risk that the annuity is a bad investment and is an attractive option offered by many annuity writers and companies.

Insuranceopedia explains Installment Refund Annuity

Annuities guarantee the insured that they get a constant stream of income over a specific period of time. There are different types of cash refund that are available to many annuitants with their own advantages.

The installment refund annuity ensures that the beneficiaries of the annuity holder get the remaining balance of the annuity in installments when they die. For instance, if the annuity holder purchases an annuity of $200,000 and only receives $60,000 in payment before passing away, the beneficiaries receive the remaining $140,000 in installment. Because of the time value involved, the life annuity with installment refund pays slightly higher than other cash refund annuities that offer lump-sum payments.

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