Life Option
Categories: Insurance
An annuity involves paying a large sum of money now in order to receive guaranteed periodic payments at some time in the future. You're basically buying a future income stream.
There are many kinds of annuity structures. Some involve a set period of time. That situation might work something like this:
You pay $250,000 now. When you retire, the company selling the annuity starts sending you monthly checks of $1,000. These payments keep coming for 25 years. If you die in 10 years (say, trying to get initiated into a snake-handling cult), your heirs still get the remaining 15 years of payments. The full 25 years is guaranteed one way or the other.
The life option doesn't have a set period of time. Instead, the payments come as long as the recipient is alive. You start getting those $1,000 payments when you retire. If you die, they stop.
The whole process becomes a kind of staring contest between the person receiving the annuity and the company paying it out. If the person dies early (cue action movie trope: "I've got just one day to retirement"), then they don't get much value out of the annuity.
However, if the recipient hangs on for decades, becoming the world's oldest person at the age of 146 (possibly as a result of the good favor of the snake god, Quetzalcoatl, whose cult you joined after retirement), the annuity company would end up losing a lot of money on the deal.
See: Life Annuity.