Tag Archives: Buying an Annuity

Is there any Insurance to My Estate if I Die Early Whilst Having a Long Term Care Plan?

One of the main concerns that people have about immediate needs annuities is that if they happen to die early, their premium will far exceed the payments they receive. There is a way to deal with this possibility and it is known as Capital Protection.

Capital protection is a method to insure the value of your unpaid premium for an additional cost. In case of early death, the agreed percentage of your premium is paid back into your estate by the insurance company. Obviously the proportion will reduce over time as you draw more payments.

Let’s consider an example. Suppose a client has a fund of £100,000 and would like to take Capital Protection on it while buying an annuity. The client can purchase capital protection at an additional cost, and in the event of death the insurance company would pay out the unpaid premium back to the applicant’s estate.

Say a client has an annuity from a fund of £100,000, which gives him an income of £5000 a year. If the client dies after 6 months, the amount paid out is £2500, and the unpaid premium is £97,500. Since the client passed away during the 4-6 month period, 25% of the unpaid premium will be paid back into his estate by the insurance company.

Most immediate care annuities come with an inbuilt insurance for up to six months. However, it is possible to purchase additional capital protection at extra costs. This gives your premium or estate extra protection for a certain period, in case of early death during that period.

Different providers may offer different types of capital protection plans. For instance, in addition to standard capital insurance, it may also be possible to purchase guaranteed protection that will pay out an agreed sum to your estate or beneficiaries irrespective of the time of death. While conventional capital protection reduces as more payments are made, this type of protection may have a fixed payable amount which does not reduce over time.

Value protection or capital protection annuities can be purchased for both single care annuities as well as joint care annuities. Capital protection, in addition to protecting premiums, can also be designed to protect your estate in case of early death.

Before you Buy an Annuity do your research!

What is the definition of procurement? To procure something is to plan and research its purchase, examine the product in all its aspects and to find the appropriate product that meets all the demands and needs of the buyer. As such, to procure can simply mean to buy, but with a far more analytical approach. When you buy an annuity, you are making an important decision that will affect your income during the rest of your life. An annuity once purchased cannot be reversed, and so buying an annuity is a decision that should be treated with some seriousness.

We may not realise it, but whenever we do buy something we are, in fact, procuring it. First of all we analyse our requirements, we try to understand what we need and why, next we determine a budget, consider different options, think about long term prospects and lasting power of the different options and then finally, make the purchase.

Therefore, don’t simply buy an Annuity; rather, look at it as procurement. After all, an annuity is not like purchasing an electric kettle or a pair of pillow covers. It is something that plays a significant role in retirement income; will have a huge impact on your financial security during retirement; and therefore has implications for the quality of the rest of your life.

When it is time to buy an annuity, pensioners have the right to explore the open market and shop around for the best annuity. This is known as the open market option. Despite this, a large proportion of people do not exercise this right and simply commit to the first annuity deal that is offered to them by their pension provider. Many people do not offer the same time and effort when they buy an annuity that they would to buying something far more insignificant!

Research has shown that shopping around for the best annuity is one of the most important steps in ensuring that you maximise your pension savings during retirement. Indeed, recent figures show that using the open market option to look for the best annuity deal could mean getting up to 46% more income during retirement. Not only that – shopping around also makes you aware of the different types of annuities available on the market so that you can choose one that truly suits your individual needs. Procurement involves reading reviews, understanding different options, shopping around, negotiating with sellers and finally, making a commitment to buy the product that best suits your requirements. These very same principles must be applied when you buy an annuity.