Here is brief description of how immediate annuities work and the different payout options to choose from.   All immediate annuities will pay either a monthly income or an annual income to the owner of the contract for life.  If the monthly payment option is selected payments will begin 30 days after the contract is issued and continue monthly.  If the annual payment option is selected the payments will begin 1 year after the contract is issued and will continue annually.

• Life Only:  Pays a monthly income for the life of the owner.  When the owner dies the income stops. (highest payout option) 
• Life with Period Certain (10, 15, 20):  Similar to Life only but the owner is allowed to choose a period certain option.  The options available are 10, 15 and 20 year period certain.  If you choose this option with a 10 year period certain you would receive guaranteed income for life with at least 10 years of guaranteed payments.  The way it works is if you were to die in 5 years it could continue to pay a named beneficiary for the remainder of 10 years (the period certain).  If you lived 40 years and then died the payments would stop at your death.  (Payouts are slightly less than the Life only).  The benefit to the owner is it protects against pre-mature death and the insurance company keeping all of the money.
• Life with Installment Refund:  Pays a monthly income for as long as you are alive but guarantees to return 100% of your initial investment if you die prior to getting it all back.  If you die prior to receiving 100% of your initial premium it will continue monthly payments to your beneficiary until your entire premium is received.
• Life with cash refund:  Similar to Life with installment refund above.   The one difference is if you die prior to receiving 100% of
• Life with 3% COLA:  This is similar to Life only except that your monthly payments are guaranteed to increase by 3% each year  payments are begin made.  Payments are considerably less than life only.
• *Joint Life with 50% reduction:  This option is only available for in joint contracts.  Monthly payments will be made to the owner’s until the death of the first spouse.  Upon the death of the first spouse payments will continue to the remaining spouse at a 50% reduction of the initial payment.  This option will have a higher payout than joint life only.  This is a great option to maximize income for a couple who expects costs to go down in the future.