Life With Guaranteed Term
Categories: Insurance
The punishment for murder. Or for marriage, at least in some cultures.
Also, a form of annuity contract.
An annuity generally works like this: you pay a large sum of money to an insurance company now...then, at some point in the future, you start getting regular, periodic payments in return. You essentially buy a future income stream by handing over a chunk of money now.
Different annuity products have different stipulations. Some provide income for a person's life, however long that may be. Live 40 years after retirement, the annuity has you covered. Suffer a mortal lawn mower accident walking to the mailbox to get your first annuity check...well, in that case, the insurance company only has to issue that one check.
Other annuity products cover a set period of years: 20 years, 25 years...whatever is set out in the annuity contract. Die before the end of the period and your beneficiaries will receive the rest of the payments.
Life with guaranteed term splits the difference between these concepts.
You get the payments for life, but you're also guaranteed a minimum time period. So if you live 40 years in retirement, you still get payments for the full 40 years. But, if you have a 25-year guarenteed term and get run over by that lawnmower in the first month after you quit working, your beneficiaries will get payments for the 25-year span.