What happens if I die shortly after buying a life annuity?

With a pure life annuity, payments simply stop and the remaining capital stays in the pool; that pooling is what funds everyone's income. With a guarantee period, your beneficiaries receive the rest of the guaranteed payments, and a joint-and-survivor annuity keeps paying your spouse for life. Most buyers add one of these protections.

Should a couple choose 60% or 100% survivor income?

Look at what the survivor would actually need. Housing, insurance and utilities rarely fall by 40% when one spouse dies, and the survivor also loses one OAS payment. If the survivor's other income is thin, the 100% option is usually the safer trade.

Is deferring CPP better than buying a life annuity?

Usually, yes, up to age 70. Deferral buys inflation-indexed lifetime income at rates no commercial annuity matches, with no insurer risk. The common sequence: spend from savings while deferring, then consider a commercial life annuity only if you still need more guaranteed income on top.

Life Annuity

Rente viagère in French

Quick definition

A life annuity pays a guaranteed income for as long as you live, however long that turns out to be. It is the purest form of longevity insurance a Canadian retiree can buy, and the version most people mean when they say "annuity".

Insurance against living long

A life annuity is the specific contract that pays until death: you hand a life insurer a lump sum, and it pays you a fixed monthly amount for the rest of your life, whether that is 4 years or 40. General annuity mechanics and taxes are covered in our annuity article; this one covers what is specific to the lifetime version.

The lifetime guarantee works because of pooling. The insurer pays thousands of annuitants out of one pot, and those who die early subsidize those who live long. That sentence sounds cold, but it is the honest actuarial core of the product, and it is why a life annuity can pay more per dollar, for life, than any withdrawal plan you could safely run on your own.

Single life or joint-and-survivor

A single life annuity covers one person and stops at their death, which maximizes the monthly income. Couples usually buy a joint-and-survivor annuity instead: payments continue as long as either spouse is alive. You choose the survivor percentage, commonly 60% or 100% of the original payment. The higher the continuation, the lower the starting income, because the insurer expects to pay for longer.

Guarantee periods: protecting an early death

A pure life annuity could pay only a handful of cheques if you die soon after buying, the outcome buyers fear most. A guarantee period of 5, 10 or 15 years fixes that: die within the period and the remaining guaranteed payments go to your beneficiaries. The cost, a slightly lower monthly income, is usually modest, so most Canadian life annuities are sold with one.

Why your quote is personal

Because the promise runs until death, the price depends on how long the insurer expects to pay. Older buyers get more per month, since fewer years of payments are expected; women receive slightly less than men of the same age, because they live longer on average. Interest rates at purchase matter too, and quotes for the identical contract vary between insurers: always compare several.

Deferred life annuities and the ALDA

You can also buy a life annuity now that starts paying later; deferral makes the eventual income much larger, since the insurer invests your money in the meantime and expects to pay for fewer years. Canada has a registered version: the advanced life deferred annuity (ALDA), bought with RRSP, RRIF or defined contribution funds, with payments starting as late as the end of the year you turn 85. The limits are deliberately small, 25% of the source account up to a lifetime cap of roughly $180,000 (as of July 2026), and the amount moved to an ALDA is excluded from the RRIF minimum withdrawal calculation until payments begin.

You already own life annuities

Here is a reframing that clarifies many retirement decisions: CPP or QPP and any defined benefit pension are life annuities you already own. They pay until death, they pool longevity risk across millions of people, and CPP and QPP are indexed to inflation on top. Deferring CPP or QPP is therefore the cheapest way to buy more life annuity, on terms no insurer matches, which is why many planners suggest maximizing that deferral before shopping for a commercial contract.

In Canada

In Canada, life annuities are sold only by life insurers, and the income promise is backstopped by Assuris if an insurer fails. Payouts improved sharply when interest rates rose in 2022 and 2023 and remain far better than in the 2010s (as of July 2026). The ALDA, introduced in 2020, is still a niche product offered by few insurers, but the concept fits Canadian retirement math well: cheap longevity insurance that starts precisely when savings are most likely to run thin.

Worked example

Hélène, 68, and Robert, 70, want part of their income guaranteed for both lifetimes. A $200,000 joint-and-survivor life annuity with 100% continuation quotes around $1,050 per month for life; dropping the survivor benefit to 60% raises the starting payment to roughly $1,130, but the survivor would then keep only about $680 (illustrative; quotes vary with rates, ages and features, as of July 2026). They choose 100%: their fixed costs will not fall much when one of them dies.