7.3.2 Date Income Payments Begin
Depending upon the contract, annuity payments can begin immediately (immediate annuities), or they can be deferred to a future date (deferred annuities).
Immediate Annuities
Immediate annuities can only be funded using the single premium payment method, and the first income payment is typically made one month from the date of annuity purchase. These annuities are specifically designed for those customers who need to receive a specific amount of money each month. These can be used as the sole source of income or as an income supplement. Payments may be made depending upon the need of the annuitant - on a monthly, quarterly, or annual basis.
Immediate annuities are typically designed to provide income immediately upon retirement. A fixed immediate annuity is a contract between the annuitant and the insurance company. In exchange for a lump sum premium the insurance company pays the annuitant a monthly income for the remainder of the annuitant's lifetime. (Deferred annuities are purchased with the idea of having a stream of income at some future point in time and are usually funded by periodic payments rather than a lump sum payment.)
Payments are made to the annuitant depending upon the starting principal (how much is invested in the annuity), the projected interest rate (companies vary in this regard), and the income period (based upon a projected life expectancy of 100 years). So if a person purchases a $100,000 immediate annuity at age 65, their monthly income would be less than if they purchased it at age 75 (35 years of payout vs. 25 years of payout).
Deferred Annuities
Deferred annuities can be funded through either the single premium payment (single premium deferred annuities) method or through periodic premium payments (flexible premium deferred annuities) since income payments won't start until some future time.
Can the variable annuity contain such features as waiver of premium or term insurance riders?
Yes, it can. Obviously, the provisions apply only to the accumulation period of a deferred variable annuity.
