Longevity Insurance
What Is Longevity Insurance?
Longevity insurance is a financial product designed to protect individuals from the risk of outliving their savings. It typically involves purchasing a deferred annuity that begins providing income at an advanced age, such as 80 or 85.
The purpose of longevity insurance is to ensure retirees have income later in life when personal savings may be reduced.
Why It Matters
People are living longer than previous generations, increasing the possibility that retirement savings may not last throughout a person’s lifetime. Longevity insurance helps address this challenge by guaranteeing income during the later stages of retirement.
This protection can provide financial security and peace of mind.
How Longevity Insurance Works
Longevity insurance products generally require an upfront payment during retirement or near retirement.
In return, the insurer guarantees future income beginning at a specified age.
Features may include:
- delayed income payments
- lifetime payment guarantees
- protection against longevity risk
These products are often structured as deferred annuities.
Longevity Insurance vs Immediate Annuity
- Longevity insurance begins payments later in retirement.
- Immediate annuities begin payments shortly after purchase.
FAQs About Longevity Insurance
Why delay income payments?
Delaying payments increases the size of future income.
Who benefits most from longevity insurance?
Individuals concerned about outliving retirement savings.
Is longevity insurance guaranteed?
Payments are guaranteed according to the insurance contract.
Related Terms
- Longevity Risk
- Deferred Annuity
- Qualified Longevity Annuity Contract (QLAC)
- Lifetime Income
- Retirement Income Streams
