What Is Another Term for Pure Life Annuity?

Alternative Terms for Pure Life Annuity

A pure life annuity is commonly known by several other names in the financial industry. These alternative terms help describe the specific nature of this annuity type, particularly its payout structure. You may encounter it referred to as a “life only annuity,” which directly highlights that payments are solely tied to the annuitant’s lifespan.

Another frequent term is “straight life annuity.” This name emphasizes the straightforward nature of the income stream, where payments continue in a direct manner until death, without additional complexities or provisions for beneficiaries. Similarly, “single life annuity without refund” is used to clarify that the annuity covers only one individual and provides no residual value or payout to others upon the annuitant’s death. “Life income annuity” also serves as an interchangeable term, stressing the primary purpose of providing income for the annuitant’s entire life.

Defining the Pure Life Annuity

A pure life annuity represents a contract, typically with an insurance company, designed to provide a steady income stream. This financial product requires either a lump-sum payment or a series of payments from the individual. In exchange, the insurance company commits to making regular income payments to the individual, known as the annuitant, for their entire lifetime.

This type of annuity is a form of immediate annuity, meaning that income payments typically begin soon after the contract is funded, often within 12 months. The fundamental purpose of a pure life annuity is to provide financial security and peace of mind by guaranteeing income that cannot be outlived. It serves as a tool for managing longevity risk, which is the risk of outliving one’s savings in retirement.

Core Operational Characteristics

The defining feature of a pure life annuity is that payments are strictly for the annuitant’s life and cease entirely upon their death, regardless of how long payments have been received. No residual value or death benefit is paid out to beneficiaries or heirs, even if the annuitant passes away shortly after payments begin. This structure fundamentally differentiates it from other annuity types that might include features like guaranteed payment periods or beneficiary payouts.

Once a pure life annuity is purchased and activated, it is generally irreversible; the contract cannot be canceled, cashed out, or altered. This commitment transfers the risk of the annuitant living a very long life directly to the insurance company. Because the insurer’s payment obligation ends precisely at the annuitant’s death and there is no provision for a death benefit or residual payout, pure life annuities typically offer the highest periodic income payments for a given initial investment compared to annuities with other features. This higher payout reflects the complete transfer of longevity risk and the absence of any continuing obligation for the insurer beyond the annuitant’s lifespan.