Impaired Life Annuity
An impaired life annuity is offered to people who have one or more health conditions that may affect their life expectancy. An impaired life annuity is similar to an enhanced annuity, but allows for more serious diseases to be properly taken into account.
Experts believe that 30% of people taking out standard annuities could qualify for an impaired life annuity, but fail to ask because they assume their health condition is too small or insignificant.
Impaired life annuities were originally only offered by a small number of firms, but they are now offered universally which means good news for the consumer due to an increased amount of competition.
As is the case with standard annuities it is always worth shopping around for an impaired life annuity, as different firms will rate illnesses in differing ways, and you will find the rate offered to you will vary from firm to firm. Again in these situations it’s advisable to consult an IFA (Independent Financial Advisor) who will help you find the best and most suitable deal for you.
Whilst it may be tempting to take up smoking for a few weeks for a better rate, insurance companies will require proof of your health problems through doctors’ notes and a medical – so it’s nearly impossible to trick them.
Insurance companies will work out your annuity rate in a rather blunt and uncompassionate way, but they must do this to ensure they make any profit. If someone has a pension fund of £50,000 and an illness that gives them a shorter life expectancy, the insurance firm will most likely offer them around £6-7,000 a year, as opposed to someone with the same fund but no health issues who may only be offered £4,000 a year. This is because the customer in the first example isn’t expected to live as long, so will cost the insurance firm less in the long run.