Life with period certain is an annuity payout structure that pays for the annuitant’s lifetime and guarantees a minimum number of years of payments to a beneficiary if the annuitant dies during the certain period. It combines the lifetime guarantee of a single life annuity with the legacy protection of a period certain.
How Life with Period Certain Works
If the annuitant lives beyond the certain period, payments continue for life – the certain period simply expires unused. If the annuitant dies during the certain period (say, in year 5 of a 10-year certain), the remaining payments (years 6-10) go to a designated beneficiary. This eliminates the worst case of pure single-life payouts where an annuitant dies in year one and the carrier keeps the entire premium.
Common Variations
Most carriers offer 5-, 10-, 15-, and 20-year certain periods. The longer the certain period, the lower the starting monthly payment. A 65-year-old man buying a $100,000 SPIA might receive $555/month with a 10-year certain or $530/month with a 20-year certain, compared to $580/month with no certain. Most retirees pick 10 or 15 years – long enough to feel meaningful, short enough that the income hit stays small.
When to Choose This Payout
Life with period certain is the standard recommendation when an annuitant wants lifetime income but is concerned about leaving heirs with nothing if death is early. If lifetime income is less critical and the goal is a minimum total payout, look at a refund annuity instead.
