A joint and survivor annuity is specifically designed to provide income based on two lives and to continue payments after the first annuitant dies. Payments remain payable while at least one of the covered individuals is alive, making this arrangement particularly appropriate for a retired couple seeking ongoing income security for both spouses.
Depending on the contract, the surviving annuitant may continue receiving 100% of the original payment or a specified reduced percentage, such as two-thirds or one-half. Because payments may continue for a longer combined life expectancy, the initial income amount is generally lower than it would be under a comparable single-life annuity.
A joint life arrangement may terminate payments upon the first death, depending on the contract design, which would not satisfy the stated objective as effectively. A single-life annuity protects only one annuitant ' s lifetime. Life with period certain guarantees payments for a specified minimum period but does not necessarily guarantee income throughout the surviving spouse ' s lifetime once that period expires.
The critical requirement is protection for both individuals for as long as either remains alive, which is precisely the function of a joint and survivor annuity.
Study Guide Reference: Annuities — joint and survivor settlement; joint-life arrangements; life-income options; survivor protection.
