Cash Refund Annuity

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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.

BREAKING DOWN '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.

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RELATED FAQS
  1. What are the best ways to sell an annuity?

    The best ways to sell an annuity are to locate buyers from insurance agents or companies that specialize in connecting buyers ... Read Full Answer >>
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    Non-qualified variable annuities are tax-deferred investment vehicles with a unique tax structure. After-tax money is deposited ... Read Full Answer >>
  3. Can a variable annuity be rolled into an IRA?

    You can roll qualified variable annuities, such as other qualified retirement plan accounts, into a traditional IRA. Non-qualified ... Read Full Answer >>
  4. Are variable annuities subject to required minimum distribution (RMD)?

    Variable annuities are insurance contracts that provide tax-deferred growth of assets that can later generate a guaranteed ... Read Full Answer >>
  5. 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 >>
  6. 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 >>

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