Enhanced Annuities
Enhanced annuities may just be the greatest thing about having a somewhat shorter life expectancy than the typical population. An enhanced annuity plan is one that takes into account any minor or major medical or health conditions when calculating the rate at which benefits will be paid over the course of time. It is not uncommon to find special enhanced annuities for smokers and people with diabetes as well. In fact, even minor health conditions, such as high blood pressure, are usually enough to qualify an individual for an enhanced plan and receive a higher income payment every month.
Qualifying for Enhanced Annuities
In order to qualify for an enhanced annuity, one must show evidence of medical ailments that would ordinarily cause a physician to believe the individual has a shorter than average life expectancy. Since the idea behind annuities is to award a monthly income of the entire investment over the course of the investor’s remaining life, people whose life expectancy is shorter in theory have less time in which to receive the entire sum of their investment. Therefore, monthly payments are adjusted to allow the individual to make the most out of the investment.
More than 40 percent of retirees qualify for some type of enhanced annuity. However, many simply do not realize that their diet controlled diabetes or mild high blood pressure may be enough to qualify them for one, so they never apply. The exact difference between a standard pension annuity and an enhanced one will depend on the severity of the condition, but one should not dismiss the idea of applying for the enhanced version on the notion that their illness is not severe enough to warrant a difference.
Enhanced Annuities: Beyond Death
People with very serious conditions such as cancer will typically receive the greatest enhanced benefits owing to the fact that their life expectancy is shortest. These people may wish to add their spouse or some other beneficiary to their annuity so that the plan continues to pay benefits even beyond their own death. With this option, the difference between standard annuities and enhanced annuities may not be as great, but the payments will continue for the remainder of the surviving spouse’s life.
It is a highly personal decision that will be unique to each set of circumstances. A financial advisor may be able to help couples determine if taking this approach to enhanced annuities offers the greatest benefit. In some cases, especially if the spouse is in good health, including them in the plan will lower the monthly payments drastically; so much so that some couples find it insufficient to support the financial burden of living with a terminal disease.
Every case that applies for enhanced annuities are assessed on an individual basis. There is no standard formula for pre-screening applicants. Therefore, the best course of action is always to apply for the greater benefit if there is even a small chance that the individual may qualify. The worst that could happen is that they do not, in which case they will receive the standard annuity payment, something that would have happened anyway had they not applied.