Different Types of Annuities in Insurance such as Ordinary/Deferred Annuity
Annuities are a long term investment with the insurance company and the payments made for a fixed period of times for the investment made by the annuitants. Here we will discuss on deferred annuity, ordinary annuity and also for various other types. Annuities are not just simple investment products for retirement savings, but more than that. It provides growing returns that helps with increasing consumer needs.
The company issues a contract to the person who buys the product. It even includes variable annuities that offer higher payments in case if underlying securities rose and locked in minimum payments if the investment fell.
How do annuities work?
An annuity issued by an insurance company that helps you protect from the risk of outliving your income. With this whatever payments you make, you will be getting periodic payments for life.
Annuities are flexible and you can make lump sum payment, invest for fixed time period. It also has option for receiving payments immediately or from later date. You can also select a rate of return from the options of fixed, variable or indexed rate.
There is always some risk associated with it though the company guarantees and protects your investment. .
Types of annuities
There are major two types of annuities – immediate and deferred. With these two main types, the options available are single premium, structured settlements, lotteries, pensions and worker’s compensations and many more.The annuities are designed to meet investor needs and there are hundreds of products to choose from. There are many payment and liquidity options, survival benefits and investment models offered. Let us see details about these options.
Through structured settlements, you get provide periodic payments over time for cases of a physical injury, a plaintiff and defendant can negotiate for the future medical and family needs. The annuitant gets choice about how payments are structured, how interest rates or returns is guaranteed against loss under the terms of the settlement contract etc.
In single-premium annuities, you make lump sum payment. Single-premium annuities are of two types: Immediate and deferred. The main difference between the two types is the time you start getting income and length of time. In case of immediate single-premium annuities, you begin paying out within a year of their purchase, where as in deferred single-premium annuities, you can accumulate interest over time. According to your needs, you can ask for pay-outs time in the futuredepending upon investor needs.
Single-premium annuities can be fixed backed by a predictable rate of interest or varied which is funded by stocks, bonds and other equities.
A pension annuity plan provides a life annuity option that pays a retired worker till he dies or to a surviving beneficiary for the rest of their lives. There are several different pay out and survivor benefit options to choose from.
Anyone who has won a lottery can collect the amount in a one-time, lump-sum payment or through a payment schedule and can receive periodic disbursements.
The lottery distributions through an annuity are not tax-free like other annuities.
Other Types of Annuities
Annuity is being made use in cases of divorce, business disputes, law firm break-ups, for paying attorneys’ fees etc.
If you are worried about outliving your income and wants do something about, you can consider investing in an annuity and plan to receive fixed income in the future.
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