Many different insurance companies provide have different types of annuities to offer in their product line. An annuity is an insurance policy popularly used by investors. The policy works as a payout income or rather a retirement strategy.
So how does an annuity work? First, the owner makes an investment in the annuity by purchasing the policy and then payments are made to you on a later day. Payments can be made monthly, quarterly or annually depending on the series option you take. The total sum of money you receive highly depends on the length of your payment period. You also have an option to receive payment in form of fixed annuity or variable annuity.
What are the Different Types of Annuities?
There are different types of annuities in many insurance companies today. So it is important that you get a clear understanding of your preference, interest rates and the annuities pros and cons to experience. Here is a brief explanation of different types of insurance annuities.
This is a type of annuity that has regular and periodic payments that last for many years. It is the responsibility of any insurance company offering it to compile and invest on the payments. Distributions are given at the conclusion of the accumulation period. Unlike other annuities types, deferred annuities allow buyer to save for retirement instead of being forced to buy the contract immediately.
Lifetime annuities make distribution payments to the annuitants or owner for their entire lifetime. The contract is purchased with huge sum of money. In case the holder dies with a balance, it reverts to the insuring company.
This type of contract has its credited returns varying according to the performance of the investment of the portfolio selected by the annuitant. They are popular among persons who are seeking a growth in their portfolio but tolerating a risk. Normally, the types of variable annuities include option that guarantees returns, income and withdrawals.
There are two types of fixed annuities in regard of distribution model; immediate and deferred fixed annuity. A fixed deferred annuity is one the many types of annuities that makes fixed and guaranteed rate of interest for the first deposit of the accumulation period.
Immediate annuities on the other hand the owner receives a continuous series of payment once the first investment is made. For instance, you can choose to purchase one when you are about to retire.
Indexed types of annuities
Indexed annuity as a type of insurance policy whose credited interest rate and the economic performance index are tied together. The indexing rules help the holder to take part in the market gains and at the same time limiting fluctuations in value.
If you are still debating, which type of annuities is the best place for your money; the answer is highly determined by your financial position and the investment objectives. All the different types of annuities explained are effective saving tools you help you accumulate wealth. For the sake of clarity it is important that you consult a financial expert who will tell you more on different types of annuities.