If you and/or family members are worried that the enormous medical costs of a major long-term illness will drain family income, an increasingly popular, special kind of annuity might offer a remedy.

The possible solution: A “medically underwritten immediate annuity.” In exchange for handing over a lump sum of money to an insurance company, starting right away and then every month for life, you are paid an amount that likely is much higher than what you could generate with a standard immediate annuity. Unlike many other annuities, this type doesn’t charge hidden fees or high commissions…and it is relatively straightforward.

The catch: You qualify only if you are chronically ill, which means, for ­example, having cancer, cardiovascular disease, advanced diabetes or Parkinson’s or Alzheimer’s disease. Although that sounds grim, these annuities can be useful if you expect to live a relatively long time with a chronic condition but, because of the condition, can’t qualify for long-term-care insurance. Payouts are anywhere from 20% to 50% higher than those of standard immediate annuities. Example: A healthy 70-year-old man who buys a $100,000 standard immediate annuity might expect to receive $861 per month ($10,332 per year) for life…while a $100,000 medically underwritten annuity might pay a 70-year-old man with a serious heart condition $1,003 per month ($12,036 per year).

Downside: If you die soon after buying a typical medically underwritten annuity, payouts end upon your death. However, you can structure the annuity to pay survivor benefits if you’re willing to accept lower monthly payouts, which still will be higher than payouts from a comparable standard immediate annuity. Currently, two major insurers—Genworth Financial and Mutual of Omaha—offer medically underwritten annuities, and several more providers are expected to start selling them in 2017. To receive free price quotes, go to ImmediateAnnuities.com and search for “medically underwritten annuities.”

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