What Is a Joint and Survivor Annuity?

A joint and survivor annuity is an insurance product for couples that continues to make regular payments as long as one spouse lives. Annuities are generally used to provide a steady stream of income during retirement. In the case of a joint and survivor annuity, both spouses are guaranteed coverage.

Such plans sometimes include a third annuitant who may receive the balance of a pre-set minimum number of payments if both spouses die early. This is often a child of the couple who purchased the annuity.

Understanding the Joint and Survivor Annuity

With a joint and survivor annuity, insurers typically reduce monthly payments by one-third or one-half for the surviving annuitant. These and other terms of the annuity payout depend on the source of the funds and the options chosen before the payments begin.

For example, Sarah and Paul’s joint and survivor annuity pays them $6,000 monthly. When Sarah dies, Paul might receive $3,000 to $4,000 monthly.

When purchasing an annuity from an insurance company, the company decides what income payment options it will provide, including single or joint and survivor options. However, employer-sponsored qualified plans must make the joint and survivor annuity the automatic option for couples married at the time of retirement. An individual may receive a single-life annuity only with written approval from the primary annuitant’s current or former spouse.

The Third Beneficiary

If an annuity purchased through an insurance company has an installment refund provision, the company must pay out an amount equal to the original value of the annuity. If both annuitants die before monthly payments have exceeded the principal, monthly payments continue going to the annuitants' estate or to a named beneficiary.

If an annuity has a cash refund provision and both annuitants die before monthly payments have exceeded the principal, the balance of the principal goes to the annuitants’ estate or to a named beneficiary in a lump sum.