Layin' It on the Line: One huge benefit for annuity owners

Many benefits annuities provide are included at no additional cost or expense.

Almost all new annuity contracts provide an immediate benefit. Is it income? Is it safe? Is it freedom from market risk? The answer to those questions is yes! Plus more.

That's the nursing home waiver.

Annuity contracts have a provision that allows annuity owners to access most or even all the funds in the event that annuity owners must enter a nursing home for long-term care needs. A great fear of seniors is not only being confined to a nursing home but also not being able to afford it because their money is illiquid.

For years, insurance companies (insurance companies sell annuities) had been heavily criticized because they did not provide this waiver, and annuity owners had to pay penalties when they needed to access their money for nursing home care. Insurance companies changed their contracts to provide the nursing home waiver. Funds can be taken out without fees or penalties in the event of a need for nursing home care. There is a qualifying period, and most contracts state you must be expected to reside in a nursing home for at least six months with a doctor who will confirm this.

Here are other benefits annuities provide:

In the event of death, there are zero surrender fees. Annuity contracts have periods where you can only access all or part of your funds if you pay surrender fees. But, if the annuitant passes away, the funds are paid to the beneficiary without penalties or delays. Plus, if the contract names a beneficiary, the funds are paid from the annuity to the beneficiary without any need for probate.

Surrender penalties, why?

The answer is simple; annuities are not short-term commitments. The insurance company must make long-term investments to secure the returns offered in the annuity. Most surrender penalties are five to 10 years. There is a system for accessing the funds in an annuity without penalty. Almost all annuity contracts allow the owner of the annuity to access 10% of the annuity value annually without penalty. Annuity contracts contain many other provisions that can add to the overall benefits.

Ask the insurance agent you're working with the contractual details of any annuity they recommend. Most agents only sell annuities that have these waivers in place.

Remember, specific annuity contracts will give you a front-end premium bonus. Still, in place of that upfront benefit, they require the annuitant to keep the policy throughout the entire surrender period.

We recommend you do the calculation on which contract works best for you and your loved ones.

Lyle Boss is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Boss Financial, 955 Chambers St., Suite 250, Ogden, UT 84403. Telephone: 801-475-9400.