Annuities
What Is a Life Insurance Annuity?
Life insurance death benefits are often substantial, which means beneficiaries may have several options for how they receive their payout. One of the most flexible and manageable options is a life insurance annuity, which delivers fixed, regular payments over time—creating a steady income stream instead of a single lump sum. Below, we’ll break down how life insurance annuities work, their benefits, and how they differ from other types of annuities.
What Is a Life Insurance Annuity?
A life insurance annuity is a method of distributing a life insurance policy’s death benefit in a series of scheduled, fixed payments rather than as a one-time lump sum. Beneficiaries who prefer predictable income or find managing a large sum overwhelming may choose this structure for added financial stability.
Types of Life Insurance Annuities
Beneficiaries can typically choose from two main types of life insurance annuities:
Fixed-Period Annuities
This type pays out the death benefit over a preselected period—such as 10, 15, or 20 years. The insurance provider calculates the amount of each payment by dividing the total benefit by the chosen time frame. If the beneficiary passes away before the payout is complete, the remaining payments can be redirected to another designated person.
Lifetime Annuities
A lifetime annuity provides payments for the remainder of the beneficiary’s life, offering long-term financial support. The amount of each payment is based on the beneficiary’s age and life expectancy. While monthly payments may be smaller for younger beneficiaries, they continue for as long as the recipient is alive.
Life Insurance Annuity vs. Life Annuity
Though they sound similar, a life insurance annuity and a life annuity serve different purposes:
Feature | Life Insurance Annuity | Life Annuity |
Purpose | Delivers death benefits to loved ones | Provides steady income during retirement |
Primary Beneficiary | The named beneficiaries of the deceased | The policyholder themselves |
When It Pays | After the insured passes away | While the policyholder is alive |
Payment Source | Death benefit from a life insurance policy | Contributions made during the policyholder’s lifetime |
A life insurance annuity supports beneficiaries after a loved one passes away, while a life annuity is an income tool for retirees seeking financial consistency.
When Should Beneficiaries Choose an Annuity Payout?
Opting for a life insurance annuity instead of a lump sum can be a smart decision in several scenarios:
- The beneficiary doesn’t need immediate access to the full benefit
- A steady, predictable income stream is preferred
- There’s concern about managing a large sum responsibly
- There’s a desire to prevent impulsive spending
- The unpaid balance has the potential to accrue interest
- Simpler long-term financial planning is a priority
Learn More with Extensive Family Life
Death benefits don’t have to be overwhelming or complicated. At Extensive Family Life, we help make life insurance simple, accessible, and tailored to your needs. Whether you’re considering a term policy, whole life coverage, or want to explore annuity payout options, we’re here to guide you through every step of the process.
Speak with an agent at Extensive Family Life today to discuss your life insurance goals and find the best fit for you and your loved ones.
Reach Out Today
Get a Quote Now For Your Life Insurance!
Requesting a quote won’t flood your phone—we respect your time and privacy.
No aggressive calls, just honest help from a trusted life insurance broker.
By clicking “Get Quote Now,” you acknowledge that you’ve read and agree to our privacy policy. You also give permission for a licensed insurance agent to contact you via phone call, email, or text/SMS at the number and email address you provide. These communications may be made using automated technology. Your consent is not required to make a purchase. You may opt out at any time by replying “STOP.”
