Long term care insurance policies are not standardized, so the services covered by different companies vary greatly. Each policy has its own eligibility requirements, restrictions, costs and benefits. Services generally covered include: nursing home care (skilled, intermediate and custodial), care in your own home and in adult day care centers, assisted living, personal care, hospice care, and care for people with cognitive disorders like Alzheimer's disease. Services generally excluded include: psychological disorders, such as anxiety or depression, alcohol or drug addiction, illness or injury caused by war, attempted suicide or intentional, self-inflicted injuries.

Insurance companies also offer policy holders a choice of daily benefits (how much the company will pay per day for care). This usually ranges from $40 to $250 a day for care in nursing homes. To decide what you need, it is important to know how much nursing facilities in your area charge. Home care benefits are usually one-half of that for nursing home care and only pay up to a fixed amount per hour of service. For example, $60 a day or $20 per hour. Keep in mind that your policy usually does not pay for your needs in full, so you will have to pay the balance out of your own pocket.

In addition to the daily benefit, you will have to choose a benefit period, meaning how long you want the insurance company to pay your long term care bills. Benefit periods may run one, two, four, six, ten years or, sometimes, for the rest of your life. Naturally the higher the daily benefit and the longer the benefit period, the more expensive the long term care insurance plan is.

As one ages, in the event that you cannot keep your independence, there are plenty of options available: nursing homes, home health services, adult day care centers, assisted living facilities. The money to pay for such services, however, is the problem.

Currently, the average cost in a nursing home for a private room is $181 per day, or about $66,000 per year, in a nursing home. These numbers come from a 2003 survey by Prudential Life Insurance Co. When today's 60-year olds might need such care in the year 2021, the average rate will rise to about $480 a day, or $175,200 annually if the room rates have the same inflation rate that is currently occurring in nursing home costs.

The government is unlikely to pick up the tab. The question is who has this amount of money? The obvious answer is the long term care insurance, an insurance policy that it is designed to pay for these catastrophic predictable events. Predictable in that for large group of people a certain number of people will eventually enter a nursing home, etc. People entering nursing homes or needing other forms of long term care will be financially "taken care of" by the long term care policy.

A long term care policy is designed to help cover long term care costs caused by a nursing home stay, in-home care, custodial care, assisted living residency, informal care, care provided in Alzheimer's facility or hospice care. There are insurance companies will even pay benefits for care provided by family.

Long term care insurance sometimes even pay for home and community-based care services, such as physical, speech, and occupational therapists; home health aides and visiting nurses, hospice care or adult day care. (Skilled care generally refers to 24 hour treatment by registered nurses under doctor's supervision. Intermediate care is occasional nursing and rehabilitative therapy and care under the supervision of medical personnel. Custodial care deals with activities of daily living such as help in dressing or eating.)

When the member of the long term care insurance plan requires supervision to protect themselves from threats to their safety and health as well as due to severe cognitive impairment in addition if the policy holder is unable to perform without substantial assistance from another individual at least two out of six of the activities of daily living (ADLs) the long term care insurance plan will pay a set amount of an insured's costs.

Benefit triggers can vary by policy. In a qualified policy these activities of daily living are: transferring, continence, bathing, toileting, eating and dressing . When the benefits of a long term care insurance plan are triggered, the policy will pay up to a preset maximum daily benefit for a specified time period, till the policy holder no longer needs a long term care insurance plan, or until the policy holder has exhausted their benefits.

A long term care insurance plan holder must also fulfill the waiting elimination/period period before collecting any policy benefits. The "elimination period"/"waiting period" is the deductible. Waiting periods vary in time frame. There are numerous options available on most long term care insurance company contracts, but 90 day waiting periods are most commonplace. An insured is liable for all costs related to their long term care expenses during the waiting period. The policy provider will begin paying benefits as soon as the long term care insurance plan holder has met the requirements for a claim and the waiting period is fulfilled.

Medicare will not take care of long term care needs. It is a tremendous mistake to believe that Medicare will cover the long term care bill. This is an undisputed fact. Medicare is government health insurance for people over the age of 65 and the disabled. Long term care is custodial care that many people may need, especially as they get older. Medicare does not pay for long term care as a general rule.

Medicare provides limited long term care coverage. Medicare is limited in scope and in some limited situations, will pay some of the costs for Medicare beneficiaries who require skilled nursing or rehabilitative services for a limited amount of days. To receive these payments for a limited amount of days for rehabilitation, the Medicare beneficiary must receive services from a Medicare certified nursing home after a qualifying hospital stay.

Medicare will provide skilled nursing facility care for up to 100 days. Medicare will only pay for care that requires professional medical care. Medicare is designed to cure or medically improve a person's life. Long term care is to take care of a person. In the skilled nursing benefit of Medicare the patient must be admitted into a nursing facility within 30 days of a three-day hospital stay.

One must meet Medicaid's income and asset eligibility requirements for the government to cover the cost of certain types of long term care. Medicaid is a state and federal government joint welfare program designed to care for the indigent. Medicaid was not designed to act as a governmental long term care welfare fund. The charter of Medicaid states "jointly funded Federal, State health insurance program for certain low-income and needy people." Medicaid covers approximately 37 million individuals, including children, the aged, disabled and/or blind, and people who receive federal income maintenance payments."

Certain people have simply reduced their assets in order to meet Medicaid's requirements. Once a person has depleted their assets, they have lost control over their receive care. Recently, because government budget cutbacks, eligibility to the Medicaid program has become more difficult for those that have "given away" their assets. As well, the quality of care that one should want to receive at the golden years of ones life should not be dependant on a ever more stringent government welfare program.

In order to be considered tax qualified, the long term care insurance policy must contain certain provisions. These provisions pertain to the manner in which future benefit payments can be triggered. If the policy contains the required language, it can be considered a qualified long term care (qualified long term care insurance) insurance contract for tax purposes.

Here are some provisions. The long term care insurance company can only cancel the policy for non-payment of premiums. The policy must be guaranteed renewable. The long term care insurance company, however, may increase premiums on a group or class basis. The long term care insurance policyholder must be certified as a "chronically ill" person within the prior 12 months and must have a written plan of care, provided by a licensed healthcare practitioner.

Long term care assistance must be expected to last for at least 90 days. A chronically ill certification is required to be based on one or both of the following criteria: The inability to perform, without substantial assistance, at least two of six activities of daily living (ADLs). The ADLs are eating, bathing, dressing, toileting, continence and transferring. Substantial supervision needed in order to protect the individual from threats to health and safety due to a severe cognitive impairment. Benefit increase options (inflation protection) and nonforfeiture benefits must be offered to the applicant at the time of sale, but are not required as part of the policy.

Benefits under a qualified long term care insurance policy cannot duplicate Medicare benefits. Individuals who have large medical expenses and low adjusted gross income may find that the premiums they pay for a qualified long term care insurance insurance policy are deductible from their federal taxes. Taxpayers who itemize may deduct the cost of eligible qualified long term care insurance premiums as a medical expense on Schedule A. There is an age based limit on the amount of premiums for purposes of this deduction, which may be less than the actual policy cost. The age based limits for 2005 are:

(maximum deductible premium)
Insured ages 40 and under $270
Insured ages 41-50 $510
Insured ages 51-60 $1020
Insured ages 61-70 $2720
Insured ages 71 and above $3400

These limits are adjusted annually for inflation. When allowable medical expenses, including qualified long term care insurance premiums, exceed 7.5% of the taxpayer's adjusted gross income, the excess over 7.5% may be deducted. The age based limits above apply only to the premiums paid for the long term care insurance policy and do not reflect the maximum total deduction that may be taken by the taxpayer.

Long term care insurance is less expensive if it is purchased many years before it is expected to be used. Long term care insurance coverage can be purchased much less expensively if the long term care insurance policy is bought while the insured younger and is not to be reasonably expected to need long term care. Younger applicants who are healthy should expect to be accepted easily by long term care insurance companies.

An individual should purchase a policy twenty to twenty five years before they expect to use their benefits. Purchasing the long term policy as a "youngster" is wise and the long term care insurance company will provide the client the option to that will enable benefits to increase over the life of the policy. The reasoning is long term care costs are expected to rise in the future.

Benefit Increase Riders can be the difference between a policy that provides expected benefits when and if care is needed, and a long term care insurance policy that is "not what you expected.". The long term care insurance policy should have a benefit increase rider to your policy as an optional benefit. There are long term care insurance companies that allow policyholders the option of a benefit increase as many times as they like on an annual basis. Benefit Increase Riders offer to raise benefits on an annual basis, using one of the following methods:

Simple Interest Benefit Increase rider
In this scenario, benefits can increase by a preset percentage on an annual basis. 1%, 2%, 3%, 4% and 5% and 6% increases are common. The daily benefit percentage increase is always based on the original benefit.

Compound Interest Benefit Increase rider
Compound interest benefit increase rider causes benefits to increase by a preset percentage on an annual basis. A 5% compound increase is common. The percentage increase in this case is always based on the current daily benefit. A much more rapid increase of the daily benefit amount will acrue in later years.

Reasonably healthy people who are not afflicted with a terminal disease usually can obtain long term care insurance coverage, but different companies have different underwriting guidelines. A minor health problem such as a bum knee, for example, would probably not cause an applicant to be declined but may put the applicant in a higher rate class for long term care insurance with certain insurance companies.

It is extremely wise to have one of QuoteRetriever.com's knowledgable long term care insurance specialists shop the market for you to find the policy that is the best value for you specifically. Alzheimer's disease, for example, would preclude one from obtaining long term care insurance for every long term care insurance company, but if a policyholder developed Alzheimer's disease, they would be able to collect benefits from the long term care policy.

Reason #1: 22.4 million families provide care to a person over age 50. By 2020, the General Accounting Office estimates that 10-12 million people will need long term care.

Reason #2: 52 million family caregivers provide care to someone aged 20 or older who is ill or disabled.

Reason #3: The average cost in lost wages and benefits is around $109 per day for a caregiver who must quit his/her job to care for a family member.

Reason #4: 94% of all Americans are without long term care insurance.

Reason #5: Approximately 40% of long term care policies will be used for people aged 18-64.

Reason #6: About one third of the 700,000 stroke victims each year in the United States are under 65.

Reason #7: The younger you are when you purchase long term care insurance, the less costly it is likely to be.

Reason #8: In most cases, you can't get long term care insurance once you have a problem that requires long term care.

Reason #9: After the age of 65, Americans have more than a 70% chance of needing some form of long term care.

Reason #10: One out of five American households is providing care to an adult family member.

Reason #11: In 2004, the average hourly rate for home care was $18 per hour.

Reason #12: The average annual cost for a private room in a nursing home is $70,080.

MYTH: I'm young and healthy, so why do I need long term care insurance?

• FACT: Currently almost 1 in 2 people will require some sort of long term care assistance over the age of 65. Forty percent between the age of 18 and 65! There is also a 1 in 3 chance you will have to assist a family member with such care.

MYTH: If I do need long term care, the federal government will pay the escalating costs of long term care.

• FACT: The federal government can not afford to pay for long term care. Medicare only reimburses some, if any, costs for the first 100 days of care?nothing thereafter. Medicaid is for the people who are most in need. Qualifications for this program require a substantial spend-down of assets.

MYTH: My children will take care of me.

• FACT: Long term care situations can create great emotional strain for family members. As a result, maintaining independence and future peace of mind are the main reasons people purchase long term care insurance today.

MYTH: Long term care insurance is not a good value.

• FACT: The average annual cost for a private room in a nursing home is $70,080. This is why 72% of those admitted into nursing homes are impoverished within a year.

MYTH: I cannot afford long term care insurance.

• FACT: If you wait until later, that may be true. The younger you are when you purchase a long term care policy, the less you'll pay. Waiting until later also means there is a chance you may not even be eligible for coverage, due to a change in your health.

The average person on Medicare could wind up spending thousands per year out of their own pocket.* These costs include deductibles, co-insurance and more.

Medicare is a federal program developed to help Americans over 65 and some disabled Americans pay for the high cost of health care. There are different parts: Medicare Part A (hospital insurance) is free if you paid Medicare taxes while working. There's a monthly charge for Medicare Part B (medical insurance). Medicare Part D (prescription drug plan) is a Medicare benefit that offers a choice of prescription drug plans (PDPs) to anyone enrolled in Part A or Part B.

Medicare pays for all but $992.00 of your hospital stay during each benefit period for reasonable and necessary care in the first 60 days of confinement. For the next 30 days, it pays all but $248.00 a day for covered services. Medicare pays expenses in excess of $496.00 a day during the 91st through 150th days. These are Lifetime Renewable Days and may be used only once. If you are hospitalized more than 150 days, Medicare pays nothing.

A benefit period begins the first day of hospitalization and ends when you have been out of a hospital or skilled nursing facility for 60 consecutive days. It is possible to have more than one benefit period and more than one hospital deductible in a calendar year.

Charges for skilled nursing facility stays may be paid by Medicare if the facility is a Medicare-certified facility. To qualify for this benefit, you must have been hospitalized for at least three days and have been admitted to the nursing facility within 30 days of discharge from the hospital. The first 20 days are covered at 100 percent provided you are receiving skilled care. The next 80 days Medicare pays amounts more than $124.00 a day. Beyond the 100th day, Medicare pays nothing.

Under certain conditions, home health care is available for homebound beneficiaries. This coverage includes skilled nursing services, occupational therapy, and physical and speech therapy if provided by a Medicare-certified home health service and if determined to be medically necessary. If your physician establishes a care program that requires durable medical equipment, Medicare will pay 80 percent of the Medicare-approved cost of the equipment.

Medicare provides coverage for hospice care for patients certified as terminally ill. This benefit is divided into two 90-day hospice benefit periods and one 30-day benefit period. A subsequent extension also may be covered. You pay for the first three pints of blood and Medicare pays for any additional blood.

Medicare covers physician services, outpatient hospital services, lab services, X-ray, radiation and therapy services, home health visits, physical therapy, speech pathology services, some forms of vaccinations, durable medical equipment, limited ambulance services, prosthetic devices, immunosuppressive drugs for the first year following an organ transplant, and other medical supplies and equipment.

In 2007, the Part B premium is $93.50 a month. You are not required to purchase Part B, but it is an excellent buy because the federal government pays most of the actual cost. The Part B deductible is the first $131.00 of expenses in a calendar year. After the deductible, Medicare pays 80 percent of the approved charges. The Medicare deductible for blood expense is the cost of the first three pints.

Medicare Advantage Plans offer an alternative to "traditional" Medicare plus a Medicare Supplement policy. Medicare Advantage plans will act as a single servicing point for Medicare for Medicare Parts A & B billing functions. These plans can operate as PPO (preferred provider organization), Managed Care Plan, HMO, Private Fee for Service plan, or as a Specialty plan as approved by Medicare.

Under a Managed Care, PPO or HMO type plan, you may have to use doctors and hospitals that are in that plan network or you may have to pay a larger co-pay or other charges if you choose a medical provider that is not a member of your plan. A company that offers Medicare Advantage plans may offer coverage with a national, regional or local service area. Medicare Advantage Plans may include a prescription drug plan equal to or better than a standard Medicare Part D plan or they may require participants to enroll in a separate Medicare part D plan.

All people with Medicare are eligible to enroll in plans that cover prescription drugs. The premium for this coverage will range from less than $5 per month to about $99 per month and there may be an annual deductible of up to $250. All plans must offer at least the minimum standard benefits as set forth by Medicare but may offer significantly more coverage.

The Medicare "standard" benefit states ? after your $250 deductible is met, you will pay 25% of your prescription drug costs and Medicare will pay 75% until your total prescription drug cost reach $2,250. You will then pay 100% of your prescription drug costs until your total prescription drug costs reach $5,100. After your total prescription drug costs reach $5,100 you will pay a 5% co pay per prescription and Medicare will pay the remaining 95%.

The Medicare Prescription Drug benefit will include additional assistance for people with lower incomes. Most significantly, people with Medicare who are also eligible for Medicaid will receive full premium subsidy, full subsidy of the deductible and minimal co-pays, usually between $2-$5 per prescription. Other people with Medicare with lower incomes may receive premium and deductible assistance and/or have limited co-pay from their Social Security

In January of 2006, there were 2 new Medicare Supplement Plans made available. These Plans are titled K & L.

Plan K:

A person who chooses a Medicare Supplement Plan K will have a 50% co-pay for Medicare eligible expenses including your Part A deductible, skilled nursing co-insurance, your first three pints of blood, hospice care, and Part B deductible until such time as your "Out of Pocket" expenses reach $4,140 (for 2007). After a person reaches their out of pocket expense threshold, Plan K will pay 100% of Medicare eligible expenses.

Plan L:

A person who chooses Medicare supplement plan L will have a 75% co-pay after their deductible is met until their "Out of Pocket" expenses reach the Plan L threshold of $2,070 (for 2007). After out of pocket threshold is reached, Plan L will pay 100% of Medicare eligible expenses. The 75% co-pay applies to Medicare Part A & B deductibles as well as skilled nursing care co-insurance, your first 3 pints of blood and hospice care. Both Plans K & L include coverage for an additional 365 days of inpatient hospital care after other Medicare benefits are exhausted. The "Out of Pocket" thresholds for both plans K & L are indexed to inflation and may increase over time.

It's designed to help pay some of the medical expenses that Medicare does not pay. For instance, you can choose a Medicare supplement plan that pays the $992 Part A deductible for you.

Generally, your six month "Open Enrollment" period is the best time to buy a Medicare supplement plan, particularly if you are no longer working or covered by an employer-sponsored health plan. This period begins the first day of the month in which you turn age 65 or enroll in Medicare Part B. During this time, as long as you have Medicare Part B, you can buy Medicare supplement insurance without answering any health questions.

A benefit period begins on the first day of a Medicare-covered inpatient stay. It ends when you have been out of the hospital or skilled nursing facility for 60 consecutive days. A new benefit period begins and the beneficiary must pay a new inpatient hospital deductible. There may be as many as five benefit periods in a calendar year.

No. Medicare only covers a portion of health care costs. A Medicare supplement helps with expenses not fully paid by Medicare.

No. Supplements will not cover expenses if Medicare doesn't pay a portion of the bill, with some exceptions.

If physicians recommend a procedure that they are (or should be) aware is not covered by Medicare, they are required to notify you in writing that Medicare will not cover the service. Similarly, if a surgeon does not accept assignment for elective surgery, the physician must give you a written estimate if the charge will exceed $500.

It is the acceptance of the charges allowed by Medicare as payment in full.

Physicians who do not accept assignment are limited to charging 115 percent of the fee schedule for nonparticipating doctors.

The premium is established when you buy your policy. You continue to pay the premium required of a person who is the same age you were when you bought your policy. For example, if you buy a policy at age 65, you always will pay the rate that the company charges people who are 65, regardless of your age.

The premium is based on your current age and increases automatically as you grow older. Typically, these plans are less expensive for younger individuals, but may cost considerably more in later years.

A person can qualify for Medicare under age 65 if they meet certain criteria for disability. If you receive continuing dialysis for permanent kidney failure or need a kidney transplant you could be eligible for Medicare. If you are disabled and have been receiving Social Security Disability payments for at least 2 years or if you have Amyotrophic Lateral Sclerosis (ALS - Lou Gehrig's disease) you could also be eligible for Medicare.

It is important to know how to assess your need for insurance in every type of coverage you buy. With a Medicare supplement policy, you should review your medical care costs for the preceding year, assess your current health status and choose a plan that is affordable. You may want to consider enrolling in a Medicare Part D plan if you currently are taking medications. The cost of prescription drugs has increased dramatically in the last few years.

In its most general sense, an annuity is an agreement for one person or organization to pay another a stream or series of payments. Usually the term "annuity" relates to a contract between you and a life insurance company, but a charity or a trust can take the place of the insurance company.

There are many categories of annuities. They can be classified by:

• Nature of the underlying investment ? fixed or variable
• Primary purpose ? accumulation or pay-out (deferred or immediate)
• Nature of pay-out commitment ? fixed period, fixed amount, or lifetime
• Tax status ? qualified or nonqualified
• Premium payment arrangement ? single premium or flexible premium

Annuities can serve many useful purposes.

If you are in a saving-money stage of life, a deferred annuity can:

• Help you meet your retirement income goals. Employer-sponsored plans such as a 401(k), 403(b) or Keogh are an important part of planning for retirement. However, contributions to these plans and to IRAs are limited, and they might not add up to enough for the retirement income you need, especially if you started saving for retirement late or had contributions interrupted?perhaps due to job changes and/or family responsibilities. Moreover, your social security and defined-benefit pension (if you have one) may provide less than you need to retire. Remember that the purchasing power of defined-benefit pension income is eroded by inflation.
• Help you diversify your investment portfolio. Investment experts routinely advise that, to get the best return for a given level of risk, you should diversify your investments among a number of asset classes. Fixed annuities, in particular, offer a unique asset class?an investment that is guaranteed not to decrease and that will actually increase at a specified interest rate (and, often, potentially more). The guarantees are supported by the claims-paying ability of the insurer.
• Help you manage your investment portfolio. Investment experts routinely advise that, whenever your investments in various asset classes get too far from the percentage allocations you prefer, you "rebalance" to the original formulation, by shifting funds from the classes that have grown faster to the ones that have grown more slowly. If you do this with mutual funds, you pay capital gains taxes; if you do it in a variable annuity, you don't pay capital gains taxes. When you eventually withdraw money from the annuity (which could be many years after the rebalancing), you pay tax then at the ordinary income rate.

If you are in a need-income stage of life, an immediate annuity can:

• Help protect you against outliving your assets. Social security pays retirement income for as long as you live, as do defined-benefit pension plans. But the only other source of income available that continues indefinitely is an immediate annuity.
• Help protect your assets from creditors. Generally the most that creditors can access is the payments from an immediate annuity as they're made, since the money you gave the insurance company now belongs to the company. Some state statutes and court decisions also protect some or all of the payments from those annuities.

Unlike a 401(k) or an IRA, there are no limits on the amount that you can invest in an annuity.
Whether you're considering a deferred or immediate annuity, the amount of money you should consider putting into an annuity depends on:

• Your immediate actual and potential financial needs
• Your long-term financial goals
• Your current savings/investment portfolio
• The range of alternatives available to you

Of these, the most important is your immediate actual and potential financial needs. If you're buying a deferred annuity and you have a sudden need for cash, you can usually withdraw a small amount without penalty.

However, you'll likely pay a penalty if you make a large withdrawal within a few years after you've bought the annuity. If you're buying an immediate annuity, you usually can't get any more than the regular payments, no matter how badly you need cash. However, if you have other sources of cash that are sufficient for any emergency or unforeseen needs, then the immediate needs criterion is satisfied and the other criteria become more important.

Unlike a 401(k) or an IRA, there are no limits on the amount that you can invest in an annuity.
Whether you're considering a deferred or immediate annuity, the amount of money you should consider putting into an annuity depends on:

• Your immediate actual and potential financial needs
• Your long-term financial goals
• Your current savings/investment portfolio
• The range of alternatives available to you

Of these, the most important is your immediate actual and potential financial needs. If you're buying a deferred annuity and you have a sudden need for cash, you can usually withdraw a small amount without penalty.

However, you'll likely pay a penalty if you make a large withdrawal within a few years after you've bought the annuity. If you're buying an immediate annuity, you usually can't get any more than the regular payments, no matter how badly you need cash. However, if you have other sources of cash that are sufficient for any emergency or unforeseen needs, then the immediate needs criterion is satisfied and the other criteria become more important.

The annuity business, like the insurance industry itself, is very competitive. There are hundreds of insurers and many different types of products available to you.

There are four important things to consider:

1. Financial Solidity ? Select a company that is likely to be financially sound for many years, by using ratings from independent rating agencies.
2. State insurance department license to do business
   Make sure that the insurer you select is licensed to issue annuities in your state. Ask whether the specific type of annuity you are considering is available in your state.

Service
Expect excellent customer service. Your insurance company representative should answer your questions promptly and provide useful information that addresses your concerns. This way, you can make a well-informed decision on the annuity that best meets your needs and objectives.

Choice of investments and riders
Some insurers offer annuities with an array of investment choices and a large variety of riders. Compare these options. Some options may increase the price of the annuity. Decide on an annuity that best meets your needs.

Our annuity specialists at QuoteRetriever.com will help you find the annuity and carrier that is the best fit for your needs.

Most state insurance departments require insurance companies to provide a "free-look" period after you have purchased the policy. It is typically a 10-day span in which you can pull out of the contract and obtain a refund based on contract terms or state law. You should use this time to review the policy, ask your insurance agent or stockbroker any additional questions and make a final decision as to whether the annuity you selected was right for you.

An important decision in purchasing an annuity is deciding how you want to be paid. You can select annuity payouts for a set period of time or continue for your lifetime. With some options, a beneficiary can be designated to receive payments upon your death. You have several choices including:

Straight Life
You will get income for your entire life - even after all the money you put into the annuity has been used up. However, if you die before the money in your account has been used up, nobody, not even your dependents, will collect payouts. The straight life annuity might be right for you if you need to maximize the amount of income you receive and either don't have dependents or are not planning to use the annuity for the purposes of estate planning.

Period certain
Requires you to determine a period of years, but it will be the years you wish to receive the earnings from your investment. If you die within the time allotted, your beneficiaries will receive the remaining balance from your annuity.

Life with Period Certain
Also allows you to receive payment until your death. You are however also allowed to determine a period of time that there's a chance for you to die. And if you do pass away during that period, your beneficiaries will receive the payments in your behalf but only until the time period hasn't elapsed.

Amount Certain
You can state how much you wish to receive and how frequently, and the annuity company will let you know how long with that last. If you die within the time allotted, your beneficiaries will once again receive the remaining balance.

Joint and Survivor
This type of annuity pays you as long as you live. After your death, it will pay the joint annuitant for the rest of his or her life. You can choose the benefit your survivor will get upon your death, but this option reduces the payout amount you get.

Refund Annuity
This payout option is gaining in popularity. It provides income for life. If, however, you die before you receive an amount equal to all of the premiums you paid, your beneficiary gets the portion you had not yet collected.

If you take money out of an annuity, there may be a penalty called a surrender fee or a withdrawal charge. This fee is higher if you withdraw funds within the first years of an annuity contract. The penalty, however, drops gradually each year. Since immediate annuities are purchased to provide income, they usually can't be "surrendered" and will therefore not be subjected to a fee.

A typical surrender fee schedule could be:

• 7 percent if you withdraw funds in the first year,
• 6 percent in the second year,
• 5 percent in the third year,
• 4 percent in the fourth year,
• 3 percent in the fifth year,
• 2 percent in the sixth year,
• 1 percent in the seventh year,
• and zero in the eighth year and beyond.

The purpose of the fee is to allow the insurer enough time to recover its expenses, largely commissions, in setting up the annuity contract. It also serves to discourage annuity buyers from using deferred annuities as short-term investments for quick cash.

Some contracts may permit you to pull out a portion of the funds annually, usually up to 10 percent without a surrender charge. If this option is important to you, ask your insurance agent or company representative about this before deciding to invest your money in a specific annuity. Also, ask if there may be any other fees or charges.

A fixed annuity is suitable for people who wish to receive tax-deferred earnings. Those who are also disinclined to take too much risk with their money will benefit from a fixed annuity because the constant rate allows them to compute exactly how much they'll earn from their annuity. Lastly, a minimum guaranteed rate is provided for fixed annuities.

This also offers tax-deferred earnings and a minimum guaranteed rate, but unlike fixed annuities, an indexed annuity also promises buyers the chance of earning more when a specified market index performs well. Although indexed annuities, like other kinds, operate by itself and without the influence of the buyer, it's best that the buyer has an adequate knowledge of the markets to prevent him from making the wrong choice of indexed annuity.

Unlike the two previously mentioned annuities, a variable annuity allows the buyer a semblance of control over his investment. It is also suitable for people who are amenable to taking risks because the amount of payment from a variable annuity may increase or decrease depending on existing market conditions.

To provide better protection and more options for customers many annuity carriers allow buyers to even reserve a portion of their investment and have it earn at a fixed interest rate.

Annuities of this kind are purchased with a single lump sum payment. They are ideal for people who have substantial money to invest and keen to earn immediately.

Again, many annuity companies offer buyers the chance to modify their immediate annuity contract according to their preferences. Life Income lets a buyer earn until his death. Payments will immediately cease however upon the buyer's death and cannot be transferable to his heirs.

In a fixed annuity, the insurance company guarantees the principal and a minimum rate of interest. In other words, as long as the insurance company is financially sound, the money you have in a fixed annuity will grow and will not drop in value. The growth of the annuity's value and/or the benefits paid may be fixed at a dollar amount or by an interest rate, or they may grow by a specified formula. The growth of the annuity's value and/or the benefits paid does not depend directly or entirely on the performance of the investments the insurance company makes to support the annuity. Some fixed annuities credit a higher interest rate than the minimum, via a policy dividend that may be declared by the company's board of directors, if the company's actual investment, expense and mortality experience is more favorable than was expected. Fixed annuities are regulated by state insurance departments.

Money in a variable annuity is invested in a fund?like a mutual fund but one open only to investors in the insurance company's variable life insurance and variable annuities. The fund has a particular investment objective, and the value of your money in a variable annuity?and the amount of money to be paid out to you?is determined by the investment performance (net of expenses) of that fund. Most variable annuities are structured to offer investors many different fund alternatives. Variable annuities are regulated by state insurance departments and the federal Securities and Exchange Commission.

An equity-indexed annuity is a type of fixed annuity, but looks like a hybrid. It credits a minimum rate of interest, just as a fixed annuity does, but its value is also based on the performance of a specified stock index?usually computed as a fraction of that index's total return.

A market-value-adjusted annuity is one that combines two desirable features?the ability to select and fix the time period and interest rate over which your annuity will grow, and the flexibility to withdraw money from the annuity before the end of the time period selected. This withdrawal flexibility is achieved by adjusting the annuity's value, up or down, to reflect the change in the interest rate "market" (that is, the general level of interest rates) from the start of the selected time period to the time of withdrawal.

A deferred annuity receives premiums and investment changes for payout at a later time. The payout might be a very long time; deferred annuities for retirement can remain in the deferred stage for decades.

An immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. The time period depends on how often the income is to be paid. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought.

A fixed period annuity pays an income for a specified period of time, such as ten years. The amount that is paid doesn't depend on the age (or continued life) of the person who buys the annuity; the payments depend instead on the amount paid into the annuity, the length of the payout period, and (if it's a fixed annuity) an interest rate that the insurance company believes it can support for the length of the pay-out period.

A lifetime annuity provides income for the remaining life of a person (called the "annuitant"). A variation of lifetime annuities continues income until the second one of two annuitants dies. No other type of financial product can promise to do this. The amount that is paid depends on the age of the annuitant (or ages, if it's a two-life annuity), the amount paid into the annuity, and (if it's a fixed annuity) an interest rate that the insurance company believes it can support for the length of the expected pay-out period.

With a "pure" lifetime annuity, the payments stop when the annuitant dies, even if that's a very short time after they began. Many annuity buyers are uncomfortable at this possibility, so they add a guaranteed period?essentially a fixed period annuity?to their lifetime annuity. With this combination, if you die before the fixed period ends, the income continues to your beneficiaries until the end of that period.

A qualified annuity is one used to invest and disburse money in a tax-favored retirement plan, such as an IRA or Keogh plan or plans governed by Internal Revenue Code sections, 401(k), 403(b), or 457. Under the terms of the plan, money paid into the annuity (called "premiums" or "contributions") is not included in taxable income for the year in which it is paid in. All other tax provisions that apply to nonqualified annuities also apply to qualified annuities.

A nonqualified annuity is one purchased separately from, or "outside of," a tax-favored retirement plan. Investment earnings of all annuities, qualified and non-qualified, are tax-deferred until they are withdrawn; at that point they are treated as taxable income (regardless of whether they came from selling capital at a gain or from dividends).

A single premium annuity is an annuity funded by a single payment. The payment might be invested for growth for a long period of time?a single premium deferred annuity?or invested for a short time, after which payout begins?a single premium immediate annuity. Single premium annuities are often funded by rollovers or from the sale of an appreciated asset.

A flexible premium annuity is an annuity that is intended to be funded by a series of payments. Flexible premium annuities are only deferred annuities; that is, they are designed to have a significant period of payments into the annuity plus investment growth before any money is withdrawn from them.

Fixed annuities pay a "fixed" rate of return. When you receive payments, the monthly payout is a set amount and is guaranteed. Fixed annuities may be a good choice for:

• Conservative investors who value safety and stability.
• Those nearing retirement who want to shelter their assets from the volatility of the stock or bond market.

With variable annuities, you can invest in a variety of securities including stock and bond funds. Stock market performance determines the annuity's value and the return you will get from the money you invest. The amount of risk you are willing to assume should influence the kind of funds you select.

You may want to consider a variable annuity if you are:

• Comfortable with fluctuations in the stock market and want your investments to keep pace with inflation over a long period of time.
• Young and want to prepare financially for retirement by reaping the gains in the stock or bond market over the long term.

Deferred Annuity

This type of annuity is good for long-term retirement planning for the following reasons:

• Payments on income taxes are deferred until you withdraw the money.
• Unlike a 401(k) or an IRA, there are no limits on your annual annuity contributions.
• There is a death benefit. If you die before collecting on the annuity, your heirs get the amount you contributed, plus investment earnings, minus whatever cash withdrawals you made.

Immediate Annuity

This allows you to convert a lump sum of money into an annuity so that you can immediately receive income. Payments generally start about a month after you purchase the annuity. This type of annuity offers financial security in the form of income payments for the rest of your life. In other words, you cannot outlive it.

Immediate annuities allow you to:

• Supplement your current income. If you are nearing retirement, you may consider transferring another savings or investment account into an immediate annuity. You can also move the proceeds from a deferred annuity into an immediate annuity.
• Pay taxes only on the portion of your immediate annuity payments that is considered earnings. You are not taxed on the portion that is principal. The principal is the initial deposit made with funds that have already been taxed.

Like deferred annuities, immediate annuities can be fixed or variable. Fixed immediate annuity income payments are pegged to the amount you contribute, your age and the interest rate at the time of purchase. Those payments to you will not go up or down. Variable immediate annuity payments vary with the investments you chose.

You can think of a lifetime annuity as investment vehicle that functions as a personal pension plan. Sometimes referred to as "single life," "straight life," or "non-refund," these are a form of immediate annuity that provides income for your entire life. The payments can be increased to cover a second person. This is called a "Joint and Survivor" annuity. While most provide income for life, some may offer the option of payments for a fixed number of years.

A lifetime annuity could serve as a retirement income supplement to Social Security checks, 401(k) retirement plans, company pension funds, etc. Lifetime annuities provide income for as long as you live - even after all the money you contributed is exhausted. They can be useful for those who want the certainty and security of establishing a regular and guaranteed income stream. If, however, you die before all the funds in your account have been used up, the payment option to your beneficiaries will be determined by the choice you made when you purchased the annuity. In some cases, no payouts will be made to your dependents or other beneficiaries. Instead, you will be getting an income that you can't outlive.

A straight life annuity makes sense for someone who needs the most retirement income possible and does not plan to use the money invested for dependents or other beneficiaries.