Current Annuities - Riders That Offer Specific Benefits

When investors research current annuities today, what they are likely to find is that there are a large number of optional features that are now available as additional features on the annuity product. These options, often referred to as riders, allow annuity holders to access some additional benefits that are not offered within the main annuity product.

These riders are typically offered on fixed and variable annuity products. Due to the fact that these investment vehicles now hold billions of dollars in retirement assets, the importance of asset preservation has become extremely important. And, this has subsequently led to the development of different types of both living and death benefit protection for annuity holders.

In fact, all of the riders that are offered on fixed and variable annuity rates contracts will fall into either one of two categories. First, living benefit riders will typically offer a guarantee for some amount of payout while the annuitant is still living. Some of the living benefit riders will guarantee the annuity holder's principal. Others will offer guarantees on a specific rate of hypothetical growth - provided that certain specific conditions are met.

One example of a living benefit rider is the Guaranteed Minimum Withdrawal Benefit, or GMWB. This benefit offers the compare annuity rates holder the guarantee of a return of principal through withdrawals of a certain fixed percentage of their principal during a fixed time period - until the amount of the annuity holder's original investment has been withdrawn.

Another such example includes the Guaranteed Minimum Income Benefit, or GMIB. In this case, when the annuity holder first purchases the annuity rates, the issuing insurance company will guarantee income through a fixed annual compounding rate. Following a period of vesting, if the annuity contract is annuitized by the investor, the guaranteed income base will be used to calculate the amount of minimum monthly payments. This occurs regardless of market performance.

Death benefit riders, on the other hand, protect against declines in annuity contract values due to market conditions for the annuity holder's beneficiaries. In addition, some death benefit riders may only guarantee the initial amount of the annuity holder's principal, while others may provide the investor's beneficiaries with a death benefit that is equal to the highest recorded value of the annuity contract or with fixed annuities an attractive guaranteed rate of return.

Current annuities offer a wide variety of features that were not offered several years ago. Therefore, it is important for investors to truly understand how these riders work, as well as the additional costs that are involved with adding these benefits to the annuity contract.

Source: EzineArticles.com