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. Annuity

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

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

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

    1. A period of time when an annuity investor is in the early ...
  5. Annuitization Method

    A type of annuity distribution structure that gives the annuitant ...
  6. Systematic Withdrawal Schedule

    A method of withdrawing funds from an annuity account by which ...
Related Articles
  1. Passing The Buck: The Hidden Costs Of ...
    Bonds & Fixed Income

    Passing The Buck: The Hidden Costs Of ...

  2. An Overview Of Annuities
    Home & Auto

    An Overview Of Annuities

  3. Selecting The Payout On Your Annuity
    Options & Futures

    Selecting The Payout On Your Annuity

  4. Are annuities qualified or nonqualified ...
    Retirement

    Are annuities qualified or nonqualified ...

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center