Annuity Riders - What are the Different Types?

While this list is certainly not exhaustive, we have compiled a number or annuities riders that you may come across when shopping for fixed annuities.  Each company will have different riders available with their product, and will have variations in how those riders behave.  Be sure to explore with your advisor the different options that you can pursue to make sure that you get the best product for your money.

Annuity riders are typically used to establish additional features to the base annuity product.  They are the "options" that come with your vehicle; the added extras that make it everything that you want it to be.  As such, various riders will not suit everyone.  They are designed for specific circumstances.

Let's have a look at some of the common annuity riders:

1.    Long-Term Care Rider – Many companies will offer a long-term care rider to attach to contracts.  This rider is designed to help ease the strain of unforeseen events.  The rider will typically have a feature that will allow for waived or lessened withdrawal charges in the event that the owner is confined to a nursing home or other long-term care facility.  These are generally only needed if the event happens within the first year of the contract.  Look for contract specifics to determine the length of time necessary to qualify for long-term care rider.

2.    Terminal Illness Rider – After the first contract year, if you are diagnosed by a doctor with a terminal illness, you will typically have the option of withdrawing a percentage of the available account value without occurring early withdrawal charges.  The percentage allowed to be taken without charge will vary from company to company and product to product.

3.    Joint and Survivor – Though this isn't always considered an annuity rider, the joint and survivor option allows the payments from the annuity to continue after the death of the first payee through the life of the second.

4.    Joint and Half Survivor – Similar to a joint and survivor option, the joint and half survivor allows the payments to continue after the death of the first payee.  The only difference is that after the first death, the payments are then cut in half to the second payee.  This assumes that with the first person gone, the payee will only need half the income they needed prior to the first's death.

5.    Life Expectancy Guaranteed Income – This is an option that allows you take an income over the course of your calculated life expectancy.  Often if you die before this period, your beneficiary will continue to receive the remaining payments.  Be careful however, some companies do not mention that if you outlive your life expectancy, the payments will run out.

6.    Annuity Death Benefit Rider – This ensures that if you die before the payment period begins; the contract beneficiary will receive the greater of the account value or cumulative premiums paid into the account.

7.    Many, many more...

There is a seemingly endless supply of riders and options that can be added to a fixed annuity contract.  The important thing to remember is that you are customizing your annuity to how you would like it to behave.  Different companies are going to have different options.  You also need to be aware of what products are available in your particular state.  Some features are restricted to specific states (both company restrictions and state restrictions).

Also remember that as with adding features to a new car, adding riders and options to your fixed annuity contract will also add additional costs.  Annuity riders can help you customize your annuity product to your expectations.