Cash Refund Annuity

AAA

DEFINITION of 'Cash Refund Annuity'

An annuity contract that returns funds back to a beneficiary in the event that the annuitant dies too early. A cash refund annuity has a provision which stipulates that if the annuitant passes away before the annuity payments received equal the annuity payments made, the insurance company will pay the difference to the beneficiary. Some variations might include the addition of interest earned on top of the difference.

INVESTOPEDIA EXPLAINS 'Cash Refund Annuity'

Annuities are used to guarantee a constant stream of income over a specified period of time. Depending on the annuity features, the payments will either continue or stop when you die. In a cash refund annuity, your beneficiary receives a lump sum. For example, assume a retiree purchases an annuity for $100,000, and receives $60,000 in annuity payments before passing away. The beneficiary, in this case, would receive $40,000 as a lump sum cash refund from the insurance company. An installment refund annuity would return the $40,000 in payments over a period of time instead of a lump sum.

RELATED TERMS
  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Annuity Contract

    The written agreement between an insurance company and a customer ...
  3. Deferred Annuity

    A type of annuity contract that delays payments of income, installments ...
  4. Annuitant

    1. A person who receives the benefits of an annuity or pension. ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Annuity Due

    An annuity whose payment is to be made immediately, rather than ...
RELATED FAQS
  1. For what types of financial instruments would I want to calculate the present value ...

    Because the present value of an annuity formula relies on a consistent interest rate and identical payments for a set period ... Read Full Answer >>
  2. What exact information is included in the interest rate when calculating the present ...

    When calculating the present value of an annuity, the interest rate percentage is the rate at which future payments are discounted ... Read Full Answer >>
  3. How do you calculate a present value of annuity using Excel?

    Calculating the present value of an annuity using Microsoft Excel is fairly straightforward if you know the interest rate, ... Read Full Answer >>
  4. What is the difference between the present value of an annuity and the future value ...

    The present value of an annuity represents the sum that must be invested now to guarantee a desired payment amount in the ... Read Full Answer >>
  5. Why would I need to calculate the present value of an annuity?

    To calculated the present value of an annuity, all that is needed is the interest rate, payment amount and number of periods ... Read Full Answer >>
  6. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Calculating The Present And Future Value Of Annuities

    At some point in your life, you may have had to make a series of fixed payments over a period of time - such as rent or car payments - or have received a series of payments over a period of time, ...
  2. Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of Annuities

    These may look like good retirement vehicles, but beware of the fees buried in the fine print.
  3. Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  4. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  5. Options & Futures

    Getting the Whole Story on Variable Annuities

    Variable annuities are another way to save money tax-deferred - but don't jump in blindly!
  6. Options & Futures

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  7. Fundamental Analysis

    Present Value Interest Factor of Annuity (PVIFA)

    PVIFA can be used to calculate the present value of a series of annuities by considering cash flows and depreciation.
  8. Investing Basics

    Top 3 Ways to Manage Lump-Sum Windfalls

    Have you just had a load of money drop into your lap? If so, several enviable options are available to you. Which one is the best choice?
  9. Retirement

    Understanding Regulations on Qualified Longevity Annuity Contracts

    QLACs provide retirees a way to guarantee a lifetime income – as long as the regulations set out by the IRS are followed. Here's an overview.
  10. Retirement

    A Guide to Qualified Longevity Annuity Contracts

    QLACs are one way to make sure you don't outlive your retirement savings. Here's how they work.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!