Joint-Life and Joint-and-Last-Survivor Annuities Explained

A joint-life annuity is a contract that provides a specified amount of income for two or more persons named in the contract. Income ends upon the first death. A joint-and-last-survivor contract is much more popular because payments continue until the last death among the covered lives. Obviously, this form of annuity is more expensive than other forms because, on average, it will pay income for a longer time. This increased cost is reflected in a lower annuity payment than would be paid under a single-life annuity at either of the ages of the two annuitants, or under the joint-life annuity structure.

Clients can purchase the joint-and-survivor annuity on either a pure life basis (ending at the later death) or with a certain number of payments guaranteed. Most insurers offer a form of joint-and-survivor annuity that pays the full amount while both annuitants are alive and then two-thirds or one-half of that income when the first annuitant dies. This is called a joint-and two-thirds or joint-and one-half annuity.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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