3 Types of Annuities in Canada

• Life Annuity

• The two basic types of life annuities are on a single life or joint lives.

• Single life annuity - In the single life annuity, payments continue for the lifetime of the annuitant.

• Joint life annuity - With a joint life annuity, payments continue for the lifetimes of both annuitants, i.e. until the 2nd death.

• Term Certain Annuity
  

• Term Certain annuity is paid for the period of years selected by the annuitant e.g. 10 years at the end of which,payments cease. A registered term certain annuity cannot extend beyond the annuitant's 90th birthday. A non registered annuity term certain annuity can be for any period a company will issue a policy.

• Impaired Annuity

• Impaired annuity - An annuitant with a decreased life expectancy, can provide a short medical report outlining the health problem, medications and diagnosis. With this information an insurance company may be able to offer increased income.

• Adding options is customizing the annuity to suit yourself and your family. Various options are available including guaranteed periods, reduction of payment on 1st or 2nd death and varying income start dates.

Adding a Partner

If you wish, you can add a partner to your life annuity. Also some companies permit children at various ages to partner with a parent.

Guarantee Periods

All life annuities can be guaranteed for a various number of years. For registered policies, the guarantee period can be to age 90 or extended to age 90 of the younger partner. For non registered annuities purchased with savings, the age limit is that offered by each individual insurance company. Most offer policies for up to 30 years with some going as far as 40 years or age 100. But in fact we have a lady for whom we negotiated a policy to age 115!

REMEMBER that all life annuities are paid for life, with or without any guaranteed period.

Indexation

Indexed annuities are mostly used to protect the annuity purchaser from inflation, though sometimes for legal reasons. Most companies offer an indexation rate of 2% to 4% and your monthly payment will be increased by the chosen percentage each year.

Deferred Life Annuities

Most annuities are immediate but you can have non registered policies deferred up to 10 years which gives you flexibility in your planning.

Total Payout (cash refund)

A life annuity can be structured so that the total premium paid is returned.

Reducing Payment (joint life only)

At purchase, the annuitant can decide if the payments are to remain level for the lifetime for both annuitants. If not, payments can be reduced by certain percentages on the death of either annuitant.