Annuity Insurance

This is a type of policy issued by insurance companies for the purpose of accepting and growing funds for the applicant. Upon annuitization, the policy creates a stream of income for the annuitant. Payments to the insurance company can be made in lump sums or installments, and these contributions earn the applicant a pre-determined return.

Who is it for?

People purchase these plans due to different reasons. Below are some of the most common motives.
• They need to make significant savings for retirement.
• They require a type of investment that defers tax.
• They are looking to secure a steady flow of income in their lifetime.
Generally speaking, this kind of investment is ideal for people who do not want to outlive their income. By investing in this policy, one puts in place mechanisms for receiving money in the future. This is, of course, subject to the terms and conditions agreed upon.

How does it work?

Annuity insurance is a long-term investment plan; it is designed to help you avoid the possibility of outliving your income. By annuitization, your contributions are converted into periodic payments, and these payments can last for life.

Types of annuity

Depending on whether your needs are long-term or immediate, you can choose the type of annuity that best serves your needs.
• Variable
In this plan, you will choose investments and earn returns based on how the investments perform in the market.
• Immediate
This plan is normally bought with a lump-sum, and the guaranteed income starts shortly afterward. The investment made is converted into a steady stream of income that is irreversible once you begin to pay.
• Fixed
In this arrangement, the principal investment and earnings are guaranteed as long as the fixed payments are made. The payments are made within the existence of the contract.

Benefits Associated With This Policy

• They allow one to sock away large amounts of money and defer payment of tax.
• There are no annual limits for contribution for annuities compared to other accounts.
• When cashing out, one may decide to take a lump-sum payment or set up a guaranteed payment scheme for a specific length of time.