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Simple English definitions for legal terms
cash-refund annuity
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A quick definition of cash-refund annuity:
An annuity is a type of payment that someone receives regularly, usually monthly or yearly. It can be a fixed amount of money or a payment that changes based on investments. When someone buys an annuity, they pay a certain amount of money upfront and then receive payments for a set amount of time. Some annuities continue to pay even after the person who bought it dies, while others stop. A cash-refund annuity is a type of annuity that pays a lump sum of money to the person's family after they die, equal to the difference between the total payments received and the original price paid.A more thorough explanation:
A cash-refund annuity is a type of annuity that provides for a lump-sum payment after the annuitant's death of the difference between the total received and the price paid. An annuity is an obligation to pay a stated sum, usually monthly or annually, to a stated recipient. These payments terminate upon the death of the designated beneficiary.
For example, if someone purchases a cash-refund annuity for $100,000 and receives $50,000 in payments before passing away, their beneficiary would receive a lump-sum payment of $50,000 to make up the difference between the total received and the price paid.
Cash-refund annuities are a way to ensure that the annuitant's beneficiaries receive some benefit from the annuity if the annuitant passes away before receiving the full value of the annuity. It provides a safety net for the annuitant's loved ones.