Life Option

AAA

DEFINITION of 'Life Option'

An annuitization-method option for a typical annuity offered by an insurance company with which the annuitant chooses to receive regular income payments from his or her annuity account for life. The insurance company guarantees that the annuitant will receive payments for the rest of his or her life, and structures the payment amounts to provide room for the insurance company's profit margin.

INVESTOPEDIA EXPLAINS 'Life Option'

With this type of annuitization-method option, the annuitant is essentially converting the lump- sum value of his or her annuity account into a guaranteed income, thus removing the risk that his or her retirement savings will run out before death. In this way, the primary benefit of the life option is peace of mind. However, should the annuitant die relatively soon after starting to receive funds, he or she will not receive the full value of his or her savings (the insurance company gets to keep what's left over).

RELATED TERMS
  1. Systematic Withdrawal Schedule

    A method of withdrawing funds from an annuity account by which ...
  2. Period Certain

    An annuitization-method option with which the annuitant selects ...
  3. Annuity

    A financial product sold by financial institutions that is designed ...
  4. Deferred Annuity

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

    1. A person who receives the benefits of an annuity or pension. ...
  6. Accumulation Phase

    1. A period of time when an annuity investor is in the early ...
Related Articles
  1. Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of ...

  2. Home & Auto

    An Overview Of Annuities

  3. Options & Futures

    Selecting The Payout On Your Annuity

  4. Insurance

    What are the tax implications of a life ...

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  3. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  4. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  5. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  6. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
Trading Center