What Is a Living Benefit on an Annuity?

Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states, including the beautiful one that you're sitting in. We're going to talk today about what is living benefit on an annuity? I need you to relax because you're going to get nothing but the brutal annuity truth from Stan, The Annuity Man.

What is a living benefit rider on an annuity? So, in this blog, I will tell you all the stuff you can attach to a policy contractually that you can enjoy while you're alive. That's why they call it a living benefit because you're enjoying that contractual guarantee when you're alive. We will talk about lifetime income, confinement care, and enhanced benefits in case you get sick, which isn't good, but we can cover you there. We're going to talk about all that.

Income Riders

‌Let's dive into the Income Rider types. I encourage you to go to The Annuity Man because I've written a book on Income Riders that you can download for free, covering every single one. But what we're going to do right now is cover the three main types. There's an annuitization benefit, GMAB (Guaranteed Minimum Annuitization Benefit), which is if you turn on the lifetime income stream, it would pay this. It's GMWB (Guaranteed Minimum Withdrawal Benefit), which is a lot of Income Riders you don't have to annuitize. They're just going to pay a lifetime income stream, but it's the amount that will be paid every single month to your account. And then there's GMDB (Guaranteed Minimum Death Benefit), which is obviously, when you die, that Income Rider benefit will be paid out as a death benefit. Once again, get my book; I cover every single type of Income Rider that is out there so that you fully understand them.

‌Confinement Care Riders

‌A popular living benefit that's pitched out in the annuity hinterlands to everybody is what's called these confinement care riders, enhanced riders. Some people call them long-term care riders. They're really not long-term care because long-term care is a health insurance product, and annuities are life insurance products. But I digress. At the end of the day, an annuity can provide that kind of confinement care and nursing home coverage if you get sick. The way I say it in the South, if you get sicker, you get your money back quicker. That's what this is all about. You're, in essence, proving to the life insurance company that issues the annuities that your life expectancy is less. And when your life expectancy is less, there will be fewer payments, which means the payments will be higher.

‌So, the good news about confinement care type riders, these living benefits attached to Deferred Annuities like an indexed annuity, is that you do not have to take any tests or blood tests. There's not a nurse that's going to show up at the house. It's a guaranteed issue. So, all of you people out there are smoking 12 packs of Lucky Strikes every single day and gulping down a gallon of Jack Daniels; you get the annuity. But you have to understand it's not as good coverage as your typical and traditional long-term care coverage. Still, it is a guaranteed issue and a very good supplemental policy to what you might currently have.

‌The other benefits that you can also get, we talked about confinement care benefits, are disability benefits and nursing home benefits. Some policies, and you have to check your policy or deal with me. Stan The Annuity Man, America's Annuity Agent, I'll explain it to you, is some of these disability clauses in the policies or nursing home clauses allow you to get your money out if you qualify for that. So, keep that in mind. You have confinement care, disability, and nursing home, which are all living benefits that can be provided and attached to a policy. But you have to tell me specifically what you want to contractually solve for, and then we'll shop all carriers for that specific goal, and we'll show you the highest contractual guarantee.

‌30,000 Foot View

‌So, the cost for living benefits, it's important for you to know that it's in the policy, it's in the contract. You should ask me Stan The Annuity Man, I will tell you. Let's talk about them from a 30,000-foot view.

‌The disability and the nursing home coverage and that type of benefit typically have no fee charge. That's a good thing, but ask me for that, and maybe there's an exception. I'll make sure that you understand if there are costs, but typically, there are not.

‌Other Types

‌Let's look at the other primary types of living benefits. Draw a line down a blank sheet of paper right here. Accumulation value is on the side, which is for Index Annuities, the options index option side for Variable Annuities, the mutual fund, and separate accounts.

‌And on this other side is what's called the Income Rider side. Now the Income Rider, lifetime income, that's one of the benefits. Another benefit that can be attached to the Income Rider is a death benefit. Not all carriers do that, but some do. The third one is the confinement care rider, which there are some hoops you have to jump through contractually. We will help you through that if that happens. But understand with confinement care, when you get sicker, you get your money back quicker. That's, in essence, what it is. But all those types of benefits, the lifetime Income Rider for lifetime income, the death benefit, if there's something like that attached and then confinement care, if there's something like that attached, and not all riders offer that. That fee will come out of the accumulation value for the policy's life.

‌The Costs

Obviously, there are costs for some of these living benefits; some don't, and some do. But let's talk about the ones that don't. Typically, the ones that do not have a cost are disability and nursing homes. The ones that do have a cost are the Income Riders for lifetime income, the death benefits, and confinement care benefits. And those fees are taken out of the accumulation value. The bottom line is you have to deal with us, talk with us, and ask us those questions, and I'll tell you the details of those specific riders, the specific benefits that you want to cover, and the fees attached.

‌So, we talked about living benefits. Let me give you one more benefit and that benefit is The Annuity Man. Go there, it is fantastic. You can schedule a one-on-one call with us, which is fantastic. You can use our proprietary annuity calculators, run your own quotes, and see the best live feeds of the best-fixed rates and MYGAs on the planet. You can also get my books for free. You can download them at no cost and with no obligation. Thanks again for joining me, and I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.