How Do Insurance Annuities Work?

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    David G. Pipes, CLU®, RICP®
    Business Development Officer, T.D. McNeil Insurance Services, Fresno, California
    An annuity uses the same data that a life insurance policy uses.  The life insurance policy protects the client from the financial effects of a premature death.  The annuity protects the client from the financial effects of living too long and running out of money.  In an annuity, people pool together to provide a lifetime income.  Statistically most will live to “life expectancy.”  Some will die earlier and a few will die much later.  By pooling their assets they can meet the needs of all.  The amount paid by those who die prematurely will offset the expense of those who live a very long time.
    Answered on April 25, 2014
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