Contingent Annuitant

DEFINITION of 'Contingent Annuitant'

Someone designated by an annuitant to receive the annuitant’s payments when the annuitant passes away. When an annuity has a contingent annuitant, the annuity does not stop making payments until both the annuitant and the contingent annuitant have passed away. If the policy does not allow for a contingent annuitant, the annuity stops making payments when the annuitant dies.

BREAKING DOWN 'Contingent Annuitant'

For the same initial lump sum paid into an annuity, an annuity that provides for a contingent annuitant may make lower payments to the annuitant and the contingent annuitant during their lifetimes since the annuity is expected to pay out for a longer period than an annuity that terminates when the annuitant passes away.

Annuities are meant to provide a stable source of income, usually to retirees, usually in the form of recurring monthly payments. There are many different types of annuities, so consumers can choose one that fits their unique circumstances, including budget, life expectancy and the desire to provide for a surviving spouse. Some annuities pay out for a predetermined number of years no matter what, and if the annuitant dies during that period, the remaining payments go to the annuitant’s beneficiary. Other annuities pay out only until the annuitant passes away, and still others keep making payments until the contingent annuitant dies. Joint-and-survivor annuities are designed to provide stable income to each spouse even after one spouse passes away. Upon the first spouse’s death, these annuities might continue to pay the same monthly benefit, or they might pay two-thirds or one-half of the original monthly benefit.

There are annuities that let people pay in gradually during their working years, and annuities that can be purchased with a lump sum. How much the annuity costs depends on how much the annuitant wants to receive in monthly payments, the annuitant’s life expectancy, and other annuity features, such as whether the annuity will have a contingent beneficiary. Basically, the more the insurance company expects to pay out, the more the annuitant will have to pay in.