Annuity death benefit is the amount payable to a beneficiary when the annuity owner or annuitant dies, subject to contract terms and applicable tax rules. In simple fixed or indexed annuities, the death benefit is often the account value, sometimes adjusted for market value or minimum guarantees. Variable annuities may offer enhanced death benefits, such as return of premium, stepped-up values, or ratcheted maximums, in exchange for additional fees. Death benefits become especially important when the owner dies before fully annuitizing the contract or when beneficiaries must distribute qualified annuity balances under post-SECURE Act rules. Unlike life insurance, annuity death benefits are often at least partly taxable as ordinary income.

Advisors discuss annuity death benefits when explaining how annuities fit into legacy and beneficiary planning. They compare basic account-value death benefits with optional enhanced features, weighing costs against the likely benefit for heirs. During beneficiary reviews, advisors outline how quickly death benefits must be claimed and how payout choices affect taxation. Claims departments rely on clear beneficiary designations and death benefit provisions to process payments correctly. Understanding annuity death benefits helps advisors clarify how annuities differ from life insurance as legacy tools, set expectations for beneficiaries, and avoid surprises when taxable income is recognized on inherited annuity funds.