How to Set up a Substandard Health Annuity

Many people decide to save for retirement with a straight life annuity, which allows immediate tax benefits and deferred-income payments. If you have a medical condition that impairs your life expectancy, you may qualify for a substandard health annuity. Lower premiums are offered due to the likelihood of fewer payouts. You can set up a substandard health annuity through life insurance companies. Some financial institutions also act as brokers.

Difficulty: Moderate

Instructions

Things You'll Need:

• Advice of a financial planner
• Proof of age
• Money to invest (each plan has a minimum, such as $10,000)
• Your disclosure of occupation, income, health history and other information
• Physician's statement

Review Your Total Financial Plan

1. Discover how an annuity will fit into your overall financial plan for the future. Consult a financial specialist or calculate what portion of your income will need to be met by the annuity.

2. Consider how best to receive funds when you retire. You can set up a lump-sum payment, fixed or indexed payments andequal or increasing payments.

3. Research as many insurance companies and policies as you can and compare them. Look for financial soundness and the best access to your money.

4. Read the annuity policy that you plan to purchase in full, and get all your questions answered by the insurance company, a financial planner or tax specialist.

Get the Medical Release

5. Determine your proposed policy's definition of "substandard health" to make sure that you qualify.

6. Learn from the policy which health information you need to provide, and what will be required of your doctor. You can typically expect x-rays, blood work and urine analysis. Condition-specific tests may also include an MRI, CAT scan or allergy testing.

7. Schedule a consultation with your doctor and discuss how to meet the insurance company's requirements.

8. Present all of the required information to the insurance underwriters to get a final premium quote.

9. Purchase the policy and set up your annuity contributions based on your budget.

Tips & Warnings

• "Substandard health" may be defined differently by opposing policy providers. You'll have to make your case on their terms.
• Consider your complete medical history. You may have a combination of conditions that together comprise a substandard health risk.
• If you choose to be paid in a lump sum by your annuity when mature, you'll have to pay tax on the entire amount at once.
• A substandard health annuity purchase is a complex financial relationship with long-term consequences as well as benefits. Be sure you understand the policy you choose before you purchase it.
• Depending on the policy, you may not be entitled to name a beneficiary to receive remaining funds upon your death.