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WHAT IS REFUND ANNUITY?
In order to make the annuities more marketable, insurance companies added this feature. There are two general forms of refund feature:
- Promise to pay all or a portion of the purchase price in the event of the annuitant's early death.
- Promise to provide at least certain number of payment regardless the annuitant lives or dies.
Following table explains the main features:
Annuitant Dies |
Then |
|
| Pure Annuity | During liquidation | No further payments |
| Life Annuity Certain | During period certain | Payments for the remainder of period certain |
| After period certain | No further payments | |
| Installment Refund | When total payments are less than purchase price | Payments until purchase price is recovered |
| When total payments are more than and equal to purchase price | No further payments | |
| Cash Refund Annuity | When total payments are less than purchase price | Lump sum payment of purchase price minus total payments |
| When total payments are more than and equal to purchase price | No further payments | |
| 50% Refund Annuity | When the total payments are less than 50% of purchase price | Lump sum payment of 50% of purchase price minus total payments |
| When the total payments are more than or equal to 50% of purchase price | No further payments |
