Period Certain Annuity



Period certain annuity or a fixed period annuity is increasingly become the most sought after form of individual, fixed-term investment. This form of annuity has a distinct advantage over conventional annuities, since the proposed investor or the annuitant can select a certain time period during which he will be receiving payments or the annuity amount. This is in stark contrast to lifelong annuities or life annuities wherein fixed payments are proposed throughout the annuitant's lifecycle after reaching a certain age. Life annuities are generally advertised as investment instruments that guarantee returns for the entire life of the annuitant. As a result, the premium cycle for life annuities is much longer. This is because the annuity-issuing organization needs to have built-up sufficient cash reserve and generated sufficient interest to sustain payment of annuity amounts for an unmarked period, i.e. the annuitant's life.



On the other hand, period certain annuities are more affordable and they are offered with smaller, easy-to-pay premiums and are thus, becoming very popular among people who are looking for a small-but-fixed returns during their retired period of life or those who don't deem annuities as a necessity. Further, fixed-period annuities are also offered with many modifications wherein the annuitant can choose the guaranteed or the fixed/minimum interest rate annuity plan. Here, the annuity amount is fixed and is not susceptible to market variations and hence, the premiums for this option are a bit higher.

It is recommended that when seeking an annuity product, the investor should always opt for plans that provide some sort of Death Benefit. As explained above, the benefits are generally much bigger for life-term annuities but fixed-period annuities too offer some token amount of death benefit. Please understand that if the death benefit clause is not included and you, as an annuitant, pass-away before the annuity payout begins, your legal hairs or family members will not receive any part of the contracted returns.

Some Advantages of Fixed Annuities are:

Tax-saving & Interest Build-up

This is the biggest advantage of investing in a fixed annuity-the interest generated is not subject to any kind of taxation. This means that the tax-free, accumulating interest eventually presents itself in the form of a bigger payout at the time of receiving the annuity. The conventional form of annuities may or may not offer this feature. In fact, the interest rates offered on fixed annuities are slowly closing-in the gap created by lifelong annuities or the interest rates being offered by certificate deposits. If you plan to invest in a fixed annuity product of around 10-year period, chances are that you would have earned an interest at par with every medium-level investment option and almost at par with most aggressively-paced investment options.