If you are worried about your future, if you think that you may not have a pension after reaching retirement age, a savings formula that can help you sleep more peacefully is through the life annuity.
But What is an annuity? What is it for? How is it managed? If you want to know everything you need about life annuity insurance, here you will find all the information.
What is an annuity
An annuity, also known as annuity insurance, is actually a savings product that is considered in the pre-retirement stage. Through this, the person ensures that he will receive a periodic collection throughout his life, in such a way that the capital that is contributed in that insurance is later used to convert it into income and face the collection of what you will receive month by month.
In other words, it is like a pension that you create, where you have to contribute an initial money (an important capital) and then the insurer will have to pay a periodic amount until the person who has contracted the insurance dies (unless other conditions are established , such as that the heirs are also paid).
This money will be what you have contributed in the beginning so that later an insurer makes sure that you receive it, the most common being through a monthly income (but a single payment could also be established).
The advantage they have is that the savings you have, when deposited in this way, run a low risk of losing value due to inflation, which helps you earn more for the money you have.
Why should an annuity be of interest?
Now that you've seen what an annuity is, you may wonder what is the profile interested in them, that is, those who could consider having a life annuity.
In general, they would be all the people who want to plan their future in the long term. But, to do so, it is necessary to have a significant capital, since, otherwise, it is much more difficult to consider.
Types of annuities
Another aspect to consider about the life annuity is that there is not only one modality, but several of them. Specifically, the most common are the following:
- Capital transferred. This type of annuity has the disadvantage that the money that is invested cannot be recovered, in such a way that the initial premium, in case of death, or if you want to cancel the rent, you could not obtain it. But, in return, the insurer makes sure to offer a higher than normal rent. It is ideal for those who do not have major health problems and who can enjoy that income for a long time (so that it pays off).
- Constant income. Also known as reserved capital. It is characterized because an initial premium is offered but, unlike the previous one, it is possible to cancel the insurance and recover the premium that was contributed. The problem is that, when it comes to recovering that money, it will be done based on the market value, which can cause a lower amount to be received than was contributed at the time.
- Mixed mode. In this case it is a combination of both previous annuities. In this case, the money can be recovered; However, in the event of a death, the beneficiaries will only receive a percentage, which will also decrease as time passes.
Annuity benefits
If you are still not convinced of the annuity, it is possible that knowing what the advantages are that it offers you will make you make a decision in one way or another. Thus, the benefits that you can find are:
- Being able to choose different alternatives. And there are different annuities, so you do not have to stay with just one product, but you can choose the one that best suits you.
- Liquid annuity. This will only be if there is death insurance, since, if there is one, you can opt for the tax benefits of the product (which does not happen if you do not have it.
- Gives you security. Having a life annuity helps you to be more calm in the face of your retirement. And is that having insurance that guarantees the monthly payment of an amount, will not have to worry about making ends meet.
- You can plan the inheritance. The annuity can act as an inheritance for the heirs, in such a way that that money is left to a person.
How to hire an annuity
Taking into account that we do not know if the pension system will remain active in Spain in several years, or if these will be worth it when we reach the retirement stage, more and more people are opting for take out life annuity insurance to make sure a monthly income is received until the end of his days or even beyond, for the heirs.
But what do you have to do to get this?
Check the promotions of different insurers
Insurers, as well as banks, may have this type of service in their catalog, and it may be interesting to study several of them to find out what they offer you and the requirements you must meet to get it.
Do not stay with the first one you see, it is better to take your time and do some research before making the decision since, as we have seen, some cannot be canceled, and it could be a bad investment if you are not careful.
Be careful with the fine print
You have to be careful with those little details that may not specify when giving you information, and yet be present in the contract. Therefore, it is important that you spend your time carefully reading the contract that is presented to you and even asking questions that may arise (or not signing it at the end). If there are things that are not clear to you, do not sign it.
Always choose an insurer that you know will work
Because what if an insurer makes annuities and then disappears, goes bankrupt, or files for bankruptcy? Well, you will not be able to charge, no matter how much you want.