Broker Check

What are Annuity Riders? Explained Simply

While annuities have several main types, riders are the all the “extras” in an annuity contract. From details on death benefits, early access to funds, and all other sorts of changes or benefits that aren’t simply explained by a date and number. There are some quirks you should be aware of before continuing on with this article.

  • Know that most riders will usually add additional costs to the annuity.
  • Distributions from annuities, especially ones in excess of what is “expected” or taken during the growth phase of the annuity, may reduce your total benefits from the annuity and its riders.
  • How the company may calculate these different benefits is constantly different, the descriptions below give a basic idea of the “types” of riders. However details on how much they cost or give are best found in discussions with your advisor, and the specific company you are purchasing an annuity from.
  • Many of these riders can go by different names from company to company. We attempt to describe each rider as clearly as possible here so that you have a basis to understand the types of riders you may encounter, regardless of what name the company calls them.

The following list is organized alphabetically.

Death Benefits and “Refunds” 

If at the moment of your death, “your” money is still present in the annuity in the form of premium payments or initial principal, your beneficiaries will receive that money back after you pass on. Money that exists solely because of investments in the annuity, may not be returned by such a rider.

There are many other versions of this kind of rider, which use different calculations as to what you are owed, when those calculations are done, and so forth.

“Early Access”: Terminal Illness, Disability, and Unemployment

These riders work on “if-then” rules. If you are determined to be terminally ill, disabled, unemployed, or some other condition that impacts your ability to work or your life expectancy; then you are able to claim the value of your annuity early without paying any additional fees or charges.

Guaranteed Lifetime Withdrawal Benefit 

An unusual rider in that it allows you to take withdrawals from the annuity without penalty, even though it is technically still growing in value and you otherwise would not be able to do this. Where most annuities have a phase that you can only put in money, and a phase where you can only take out. This rider allows you to choose what happens to the money, regardless of the “phase” it is in.

The idea is that you may need some of the money from the annuity, but still want to see it grow and accumulate in value. With this rider, you can do that.

Guaranteed Minimum Benefit 

This rider tends to be used with variable annuities, given that it is based on the separate account. How it works is that if your annuity is ever worth less than the original amount you put into it, the contract will instead be worth that original amount.

There are also versions of this rider that will automatically increase this “minimum” value of your account, either by a flat percentage increase or by the highest value your account was worth at a given time interval (for example, annually).

Guaranteed Minimum Withdrawals 

Similar to the Accumulation Benefit, this rider makes it where you are guaranteed to be able to withdraw a set percent of your original principal and premiums for a period of time. Even if your annuity is now worth less than what you originally put in.

Impaired Risk or “Doctor’s Note” 

Should you catch an illness or condition that greatly reduces your life expectancy, the payouts of the annuity will be re-calculated to match your new life expectancy.

Income with Period Certain 

Period Certain assures you that you will receive payouts for a set amount of time once you have begun to annuitize. If you pass on before these payouts finish, then your beneficiaries will receive the money instead until the period certain ends.

Inflation Adjustment or Gradual Income Increase 

Inflation adjustment riders will attempt to match inflation increases, so that your income can keep its purchasing power and you keep your standard of living.

There may be other riders which similarly increase the amount you receive from your annuity payouts over time, while these may not be with the intention of combating inflation, they function the same way.

Life Income

With this the company promises to send a set payment value to you for as long as you live.

Nursing Home and Long-Term Care

This rider will give additional income should you require nursing home care or some other medically necessary long-term care.

Rainy Day and Emergency Withdrawals 

In the event of an emergency, you can use this rider to gain access to the money stored in your annuity, at the risk of reduced future payments. Typically there are other limits to this rider such as how much money of the annuity you can take out and for how long this ability lasts.

Spouse and Joint Survivorship

This rider allows you to essentially “share” the annuity, or otherwise have it transfer benefits over to your spouse. Effectively allowing the annuity to continue paying out even if one of you were to pass on.

The math of the annuity can also be adjusted at this point, such as paying out only half as much money for the survivor so that they can benefit from it longer.


More riders and explanations of them will be added to this list as we come to be aware of them, provided they are genuinely a new “type” of benefit and not a mathematical quirk of an old one.

Investors should consider the investment objectives, risks and charges and expenses of the variable annuity carefully before investing. An investment in a variable annuity involves investment risk, including possible loss of principal. Variable annuities are designed for long-term investing. The contract, when redeemed, may be worth more or less than the total amount invested. Variable annuities are subject to
insurance-related charges including mortality and expense charges, administrative fees, and the expenses associated with the underlying sub-accounts. The prospectus contains this and other information about the variable annuity.  

If an annuity sounds of interest to you, or you have any more questions, give me a call at 203-956-0289. You can also send me an e-mail to Hope to hear from you soon!

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