What Does Life Option Mean?

This term refers to an option one can choose with a regular annuity, and it implies that after paying regularly a certain amount of money for the insurance company, the annuitant will get fixed payments periodically until he or she dies.

Therefore life option can be thought as an annuitization-method which ensures the annuitant will receive an extra income from his or her insurance account for his or her entire life, no matter if the amount of the account is exceeded.

Life Option Explained

The life insurance company is responsible for structuring the annuity payments in such a way to ensure the payments for the annuitant, but also to guarantee the company's profitability. This is possible by the risk such a life option carries. In case the insured dies very soon, at a short time after he or she starts to get insurance funds, it is very probable that he or she won’t get the full value from his or her account and the remaining sum goes to the insurance company.

However, many people rather choose to have a secure income for the rest of their life, than to have a high living standard, but risking exceeding their retirement savings too soon.