What to know about an impaired life annuity – which is a product widely offered in United Kingdom, for one – is that it comes with certain characteristics that can make it attractive to those who might be suffering from severe medical conditions. It can actually offer a better rate of return on an annuity for people in that unfortunate condition, as a matter of fact.

Basically, any annuity is a form of insurance. Almost all annuities, therefore, are sold by insurance companies and they are structured to provide a steady stream of income over a predetermined period of time to those who have purchased the annuity. Generally speaking, most annuities are purchased from an insurance agent through a lump sum payment, though there are annuities that are structured so that many payments are made prior to when annuity payouts are set to begin.

There are many different kinds of annuities, including fixed rate and variable rate as well as what are called straight life programs, which pay out until the death of the person who has purchased the annuity (he or she is often referred to as an “annuitant”). In the case of an impaired life annuity, the rate of return of the annuity will be pegged to the illness the person is suffering from or severity of the medical condition.

These sorts of annuities – all of which pay what are called “enhanced rates” – can make a lot of sense to those unfortunate enough to be suffering from debilitating or even terminal medical conditions who are looking for guaranteed income over the remaining period of their lives. Enhanced rates are offered by the insurance company because of this expected shorter life expectancy on the part of the annuitant.

What this means is that the insurance company expects to make an increased sum of money because the person purchasing the impaired life annuity will probably pass away before the annuity funding itself is depleted. The payments will be payable for a lesser period of time, and anything left in the annuity will revert to the insurance company, which has paid a greatly enhanced rate in many cases.

An impaired life annuity also has a cousin that is similar and which is called an “enhanced rate” annuity. The main difference between the two annuities is in how they are underwritten by the insurance company. With an enhanced rate, there are generally no medical reports or physical exams required and a quote for the annuity can be produced in a shorter period of time.

An impaired life annuity, which comes with much more stringent financial controls and greater and stricter underwriting standards, may take a bit longer to generate a quote but many experts who advise those with severe medical conditions that can result in a decreased life expectancy say that it is actually the one to go for. Any sort of annuity should be considered very carefully prior to purchase, and the agent selling it should be consulted with our constant basis until the annuity has been set up and is up and running fully.