Guaranteed Death Benefit
What it is:
How it works/Example:
Let's say Jane Doe bought an annuity when she was 45; now she is 60 and has been diagnosed with terminal cancer. The disease is aggressive, and Jane dies in three months. Her contract provides that her son and daughter receive an amount equal to what Jane invested in the contract as a guaranteed death benefit. (The vary regarding the guaranteed amount; be sure to check your contract.) The children receive the regardless of whether the market is up or down.
Some of these benefits are taxable for the children.
Why it matters:
The conditions for using guaranteed death benefits vary by issuer. However, in general, buying a policy with a guaranteed death benefit assures investors that they'll have a minimum amount to pass on to heirs regardless of performance.