What is another term used for a pure life annuity?

**What is another term used for a pure life annuity?**

A pure life annuity can also be referred to as a life-only annuity. This type of annuity provides a regular income for the remainder of the annuitant’s life, without any additional guarantees or benefits attached. Let’s explore this topic further and address some related frequently asked questions.

1. What is a pure life annuity?

A pure life annuity is a financial product that guarantees a fixed income for the annuitant’s lifetime, with no provision for a beneficiary after the annuitant’s death.

2. How does a pure life annuity work?

When an individual purchases a pure life annuity, they invest a lump sum of money with an insurance company. The insurance company then commits to pay the annuitant a predetermined amount for the rest of their life.

3. Are there any death benefits associated with a pure life annuity?

No, a pure life annuity does not provide any death benefits. Unlike other types of annuities, such as joint-life annuities or period-certain annuities, a pure life annuity does not continue to pay benefits after the annuitant’s death.

4. How is the income from a pure life annuity determined?

The income from a pure life annuity is based on factors such as the annuitant’s age, sex, and prevailing interest rates at the time of purchase. The older the annuitant, the higher the income they can expect to receive.

5. Is there a risk of outliving the income from a pure life annuity?

No, one of the advantages of a pure life annuity is that it provides income for life, regardless of how long the annuitant lives. This eliminates the risk of running out of funds during retirement.

6. Can the income from a pure life annuity increase over time?

With a pure life annuity, the income typically remains fixed for the duration of the annuitant’s life. It does not provide any built-in inflation adjustments or increases.

7. Are pure life annuities taxable?

The tax treatment of pure life annuities varies depending on the country and its tax laws. In many jurisdictions, a portion of the annuity income may be taxable, while other portions may be tax-free.

8. Can a pure life annuity be converted into a different type of annuity?

In most cases, a pure life annuity cannot be converted into another type of annuity once it has been purchased. It is important to carefully consider the features and limitations before making a decision.

9. Is it possible to receive a refund if the annuitant dies shortly after purchasing a pure life annuity?

No, pure life annuities do not typically provide a refund if the annuitant dies shortly after the purchase. This feature sets them apart from other types of annuities that may offer refund options or death benefits.

10. Are there any disadvantages to choosing a pure life annuity?

One disadvantage of a pure life annuity is that it does not provide for beneficiaries, making it less suitable for individuals who wish to leave an inheritance or financial support for their loved ones after their passing.

11. Can a pure life annuity be surrendered or cashed out before the annuitant’s death?

Pure life annuities generally do not permit surrender or early withdrawal options. Once the annuity is purchased, the income payments continue for the annuitant’s lifetime.

12. Who is a pure life annuity most suitable for?

Pure life annuities are typically most suitable for individuals who do not have dependents or beneficiaries to support financially after their death. They provide a guaranteed income stream to cover the annuitant’s own expenses throughout retirement.

In conclusion, a pure life annuity, also known as a life-only annuity, offers a fixed income for the remainder of an annuitant’s life without any additional death benefits or features. While it lacks the flexibility and inheritance options of other annuity types, it provides security and a guaranteed income stream for those seeking financial stability in retirement.

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