Reversionary Annuities

AAA

DEFINITION of 'Reversionary Annuities'

A retirement income strategy that combines an insurance policy with an immediate annuity to provide for a surviving spouse. Similar to a permanent life insurance policy, the policy owner of a reversionary annuity pays a premium to guarantee a benefit to the survivor. With a reversionary annuity, upon the insured's death, the beneficiary receives a guaranteed lifetime income instead of a lump sum payment.

INVESTOPEDIA EXPLAINS'Reversionary Annuities'

Because the income payments will cease upon the death of the beneficiary, and if the beneficiary dies before the insured the policy is terminated, premiums are more consistent with those of term insurance policies than permanent policies. This makes the reversionary annuity more affordable for older individuals.

RELATED TERMS
  1. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Social Security

    A United States federal program of social insurance and benefits ...
  3. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  4. Immediate Payment Annuity

    An annuity contract that is purchased with a single lump-sum ...
  5. Pension Plan

    A type of retirement plan, usually tax exempt, wherein an employer ...
  6. Term Life Insurance

    A policy with a set duration limit on the coverage period. Once ...
Related Articles
  1. 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.
  2. Options & Futures

    New Option For Beneficiaries: Reversionary Annuities

    This vehicle can provide survivors with guaranteed income and lower premiums.
  3. Options & Futures

    Personal Pensions: Repackaging The Annuity

    Discover an investment that can provide a stable income once you've left the work force.
  4. Stock Analysis

    What AIG Looks Like Now (and How it Got that Way)

    Despite some mammoth mistakes and a gargantuan government bailout, AIG remains a global insurance powerhouse. Here's how it maintains its position.
  5. Forex

    The Impact of 401(k) Outflows on Advisors

    The trend in the growth of assets in 401(k) plans has shifted as Baby Boomers retire, creating opportunities for financial advisors. Here's how.
  6. Investing

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  7. Retirement

    Retire in Costa Rica with $200,000 of Savings?

    It's quite doable in this Central American oasis.
  8. Investing

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  9. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  10. Professionals

    How Advisors Can Help Expectant Couples

    Bringing a child into the world makes parents more acutely aware of their finances. Here's how advisors can help expectant couples prepare.
RELATED FAQS
  1. What happens if my insurance claim falls below the deductible level?

    Though the ins and outs of health insurance are often confusing, the concept of the insurance deductible is relatively straightforward. ... Read Full Answer >>
  2. How is the deductible I paid for my insurance claim treated for tax purposes?

    The deductible you pay on your health insurance policy may be tax-deductible if you meet certain conditions. However, whether ... Read Full Answer >>
  3. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  4. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  5. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

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

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

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