What is the purpose of a death benefit in an annuity?

The purpose of a death benefit in an annuity is to pay a designated beneficiary upon the owner's death. This feature provides financial security and peace of mind to the annuity owner, ensuring that their beneficiaries will receive a predetermined amount or the value of the annuity upon their death. This can be particularly important for individuals who want to leave a financial legacy or support their loved ones in the event of their passing.

The death benefit differs from other functions an annuity might serve, such as tax-free savings or investment guarantees, as it specifically focuses on the transfer of assets upon death. This ensures that funds accumulated in the annuity can be passed on without going through probate, providing timely access to beneficiaries. Understanding the role of the death benefit is crucial in assessing the overall financial planning and legacy goals of the individual considering an annuity.