What Is Single Premium Immediate Annuities?

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   William Bridgers

   Specialist, LTCi, DI, Annuities, Life, Designs In Life, LLC, Utah

   A "single-premium immediate annuity (SPIA)" is an annuity.  That is to say, an annuity is defined as an income stream that continues until the annuitant dies when a person pays a lump sum of money (single premium) to an insurance company in exchange for that income stream (annuity).   So, the term "single-premium immediate annuity" is a bit redundant.  Think of it as taking retirement money from a privately funded pension, except that, in this case, you are funding it with a one-time, lump-sum of money.The important thing to remember is that once you pay the single premium, that money is essentially "gone".  You have just "purchased" an income that you cannot outlive.There are all sorts of ways to design the annuity (stream of income).  You can get a monthly check, quarterly check, annual check - just about any payment schedule you can think of.  You can also have the annuity pay out completely should you die before the original single premium you gave to the insurance company gets paid out.  Should you choose that option, you will need to name a "beneficiary" to receive the remainder of the payout.Annuities, in general, are complex insurance contracts and space is not provided here to go into all the details.  But, be absolutely certain that an annuity is right for you before you fork over the money because once it is committed to the contract, you either can't get a refund or there are stiff surrender penalties associated with backing out of the deal.  Work only with an experienced insurance professional that has a solid working knowledge of what annuities are, how they work, and whether or not it is in your best interest to own one.  More advanced knowledge about annuities can be obtained by consumer-friendly websites online.

   Answered on June 14, 2013

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