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Different Types of Annuity Insurance

Annuity Insurance for Retirement Benefits

Annuity Insurance is a unique form of insurance coverage, in fact in many circles it is not even a type of insurance but rather a contract between you and your insurance company.  There are three common types of annuities:

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Fixed Annuity: These annuities credit your account at a guaranteed rate,

Variable Annuity: These annuities credit your account, but is pegged to a set of stocks and bonds.

Indexed Annuity: These credit your account, but are pegged a specific benchmark (such as the S&P 500)

More Information on Deferred and Immediate Annuities

There are also a number of types of annuity insurance and they all have different features. Here are a few annuities that are available:

Deferred Annuity

This is a savings vehicle of accumulated earnings on a tax-deferred basis. The owner of the annuity makes a one-time payment (or a number of premium payments) to the insurance company. This money accumulates earnings at a fixed rate (a fixed annuity) or a variable rate, which is determined by the growth (or the losses) in investment options that are called subaccounts. The term used for this amount of time is called the accumulation period.

Sometimes you are allowed to withdraw some of the principle and earnings without being subject to charges. Earnings in the annuity are not able to be taxed until they are distributed. After the accumulation period, you can cash in the annuity. Sometimes you are able to exchange the deferred annuity for an immediate one.

If you die before cashing in the annuity, your beneficiary generally gets the principle and additional earnings. There may be some exceptions to this though, so check with the insurance company for details.

Immediate Annuity

This is a contract between you and an insurance company (annuity issuer) where you make a single large payment of cash, and the issuer promises to make payments to you (the annuitant) for a fixed period of time (or for the life of the annuitant). The amount of the payments are based on a number of factors. Factors can include the age of the annuitant when the annuity is purchased. Other variables include the number of annuitants payments are being made to and the term of the payments (until the annuitant passes on or for a fixed period).

Sometimes annuities have characteristics similar to insurance policies. Some annuities may guarantee that your beneficiary will get a certain amount of your original principle, even if that annuity declines in value due to poor performances of the selected subaccounts. Another example is that regardless of whether you picked a fixed or variable immediate annuity, you are guaranteed to get payments for life id you elected that payout option. This remains true no matter how long you live.

Why People Use Annuities

Each type of annuity is generally used for different reasons. Deferred annuities are often investments that are both long-term and are most often used for retirement funding. Immediate annuities are most often used to provide guaranteed income during a person's retirement.

Variable annuities are often long-term investments and are suitable for retirement funding. They are also affected by market fluctuations and involve investment risk. These risks can include the loss of principle. You should always consider the goals of investments, the risks involved, as well as the charges and expenses carefully before investing. The prospectus, a document that contains all of this information, in addition to other information about the variable annuity, The prospectus can be given to you by the issuing insurance company. Read this carefully before you invest.

When it comes to investing, your retirement is an important thing to plan for. Annuity insurance can be a great tool to plan a comfortable retirement with. Annuities can also help you if you can use some tax-sheltering if you have maxed out your 401(k) and IRA contributions. Whether you are known to take some investment risks or are just planning to take the steady and direct path to financial retirement planning, annuities could have a place in your investment catalog. General Insurance can help you get the annuity that makes the most sense for your retirement goals.

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