Straight Life Annuities Explained: How They Work, Types, and Examples

A straight life annuity, sometimes called a straight life policy, is a retirement income product that pays a benefit until death but forgoes any further beneficiary payments or a death benefit. Like all annuities, a straight life annuity provides a guaranteed income stream until the death of the annuity owner.

While many types of annuities allow the annuity owner to name a beneficiary (usually a spouse) who will be eligible for either continued payments or death benefits, a straight life annuity forgoes this added benefit in favor of higher guaranteed payments while the annuitant is alive.

A straight life annuity policy may be bought over the course of the annuitant’s working life by making periodic payments into the annuity, or it may be purchased with a single lump-sum payment. Usually, lump-sum purchases are made at, or shortly after, the annuitant’s retirement. Either payment option will result in the same regular payments.

With the omission of the survivor and death benefits, a straight life annuity owner can achieve the highest possible monthly payment. Accordingly, such an annuity is best suited to individuals who lack a spouse or partner. It acts as a straight bet on longevity; the longer the owner/annuitant lives, the more they will receive in payments. However, straight life annuities may not be the best choice for couples who rely on the retirement income provided by the annuity.

As an alternative, there is the joint and survivor annuity, which continues to make payments until both named individuals (owner and beneficiary, usually spouses) are deceased. There is also the life plus period certain annuity, which pays a benefit for either the annuitant’s lifetime or for a specific period of time, whichever is longer. Another option is the cash refund annuity, which guarantees that a spouse or beneficiary will receive a sum equal to the premium paid into the annuity (minus the sum of payments already made) should the annuity owner/annuitant die before breaking even.

A straight life annuity provides guaranteed payments until the annuitant’s death, with no further beneficiary payments or death benefit.

Straight life annuities are best suited for individuals without partners or beneficiaries who seek higher monthly payments and are willing to bet on their longevity.

Yes, alternatives include joint and survivor annuities, life plus period certain annuities, and cash refund annuities, each offering different payment structures and benefits.