An annuity insurance is a savings product generally oriented to people over 60 years of age who want to have an economic complement to the benefit they receive for their retirement. A periodic annuity is obtained for life, i.e. for life.
When this annuity insurance is taken out, the insured makes the payment, known as a singlepremium. The beneficiary will gradually receive a fragmented part of this contribution plus the corresponding return it is producing.
How does annuity insurance work?
Depending on the total contribution made and the return being obtained (or agreed upon), a certain periodic amount (monthly, quarterly, half-yearly or annual) will be received.
As its name suggests, the annuity is received until death, when a percentage of the annuity can be allocated to the beneficiaries. In addition, annuity insurances usually have the particularity that the capital contributed is available to be recovered by the holder.
All this depends on the conditions offered by each bank or insurance company.
What happens when the beneficiary dies?
Here it is important to note that there are two types of annuities.
- On the one hand, the life annuity with return of premium paid establishes that after death the heirs or beneficiaries receive the remaining amount or another amount agreed with the company.
- On the other hand, there are also non-refundable annuities. What is their advantage then? The monthly income is higher. However, if death occurs earlier than expected, the loss is large. Because of these risks, only people without heirs usually opt for this formula.
We insist that it is necessary a correct study and advice before contracting a life annuity to avoid compromising situations. For example: that a person dies prematurely and having contracted a life annuity without return, his heirs do not receive any benefit.
In other cases it happens that the beneficiary dies during the collection of the annuity. Then, what his heirs receive and what the beneficiary received, little by little, adds up to more than the initial premium that was contributed at the time.
Taxation: favorable tax treatment of annuities
The periodic income received by the holder is considered as income from movable capital for tax purposes. Taxation is especially beneficial for some taxes such as Personal Income Tax, Inheritance Tax (taxed as life insurance) or Wealth Tax.
In the IRPF, this annuity is taxed for a part and not for its total.
For this purpose, the age of the insured person when he/she started to enjoy the annuity is taken into account. This means that the older the insured, the greater the exemption.
Does annuity insurance seem like a good option to ensure your standard of living after retirement? Then, we invite you to consult the information about our life annuity insurance in Zaragoza. We study each case so that you get the desired flexibility and profitability thanks to a product with great security and a very advantageous taxation.
