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.

BREAKING DOWN '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.

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