These Features Can Affect Your QLAC Rates

Published September 14, 2017
There are optional features you can choose so that your QLAC fits your needs. We’ve outlined how these options can affect your QLAC rates here.
  • We provide you the most updated quotes for retirement income with a QLAC
  • There are a lot of factors and features that can impact your QLAC rates 

The income offered in exchange for your premium payment on a QLAC will vary slightly over time due to longer term market conditions and personal attributes. For you investing junkies, long-term Treasury bonds and investment grade corporate bond yields are the usual factors which affect income return rates. Personal attributes, such as age and gender, and extra features you select will impact the quote.

Insurance companies calculate the size of your income based on how long they expect to pay you. Your personal attributes and the extra features you choose on your QLAC will affect the income you can generate. Here’s how to think about these:

Feature Let’s Think About It!
Age Buying when younger generates larger incomes.

If you purchase a QLAC earlier, you will generate more income, since the insurance company has more time to invest your money before starting to give you income.

Gender Males generate larger income than females.

Females have longer life expectancies, and therefore longer payout periods, so they receive slightly less income each year.

Premium Size Larger premiums generate larger incomes.

While straightforward, there’s another element: larger premiums actually receive a discount! A portion of insurance companies’ expenses per contract are fixed, so extra premium on top of that can go entirely towards generating income, meaning larger premiums get service at a smaller percentage of the payment. (Note: Although generally true, it’s not the case for every insurer.)

Income Start Date Later start dates generate larger incomes.

Longer deferral periods mean more time for the insurance company to invest your money before starting payments. It also means shorter payout periods so they can pay you more with each income payment.

Single vs. Joint Life Single policies generate larger incomes than joint-life policies.

A joint-life policy will continue as long as both members of the contract are alive, which will be longer than if only a single person is on the policy. Since insurance companies expect longer payout periods, they provide less income each year.

Payout Options Basic plans without extra guarantees generate larger incomes than plans with extra features.

There are plan features you can add to your QLAC that will make the guarantee more robust. Features like cash and installment refunds will guarantee a minimum cumulative income, while period certain will guarantee a minimum number of payments. These will lower your income payments because the insurance company expects to pay you for longer.

Riders Basic plans without riders will generate larger incomes than plans with riders.

Riders, or extra features that offer you increased protection, require that the insurance company take on more risk. Therefore, the income payments will be lower to compensate the insurance companies.

 

Last, there’s an inverse relationship between the credit rating of an insurance company and the income return they’ll offer for your premium. Insurers with higher ratings maintain higher capital reserves and invest more conservatively, which limits their profits and what income they can offer you. Here at Blueprint Income, we only offer insurers who have an A rating or higher, because the guaranteed income you’re promised is only as good as the financial strength and the longevity of the insurer backing it.

If you are ready to see your personalized QLAC rates, visit our annuity calculators page.

Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.