Friday, May 1, 2009
ANNUITY
The word Annuity generally means a type of investment opportunity just like the Certificate of Deposits offered by various banks. This is another type of insurance product sold by the insurance companies through their licensed agents. In this case, the holder of this policy will receive a series of future payments, by giving an up-front expenditure of money.
How annuity works: Here the customers have to make an up-front disbursement or have to pay periodically to the company. The money that is deposited in the company will increase in a fixed or variable rate in the accumulation stage. In exchange to that, the insurance company will make a series of payment to the policyholder throughout the life. This stage of pay back is also known as "payout" or "annuitization" phase. This type of policy also has death benefits.
Types of Annuity: It can be of two types- Immediate Annuity and Deferred Annuity.
Immediate Annuity – In immediate annuity, the company makes a series of payments to the policyholder for predetermined period or until the death of the policyholder. There is another type of immediate annuity called Lifetime immediate annuity. It is also called Pension.
Deferred Annuity – This is again divided into Fixed Annuity and Variable Annuity. In fixed annuity, the policyholder is going to give a sum of money to the insurance company and in return, the company will pay the policyholder a guaranteed rate of return as per agreement or until the death of the investor. And in variable annuities, the money is invested in different financial tools like mutual funds. Here the return depends on the performance of the funds, which is variable in nature.
Therefore, it depends entirely on the investor regarding the option he or she chooses. However, it is always desirable to have a proper knowledge of the current financial condition for profitable investment.
How annuity works: Here the customers have to make an up-front disbursement or have to pay periodically to the company. The money that is deposited in the company will increase in a fixed or variable rate in the accumulation stage. In exchange to that, the insurance company will make a series of payment to the policyholder throughout the life. This stage of pay back is also known as "payout" or "annuitization" phase. This type of policy also has death benefits.
Types of Annuity: It can be of two types- Immediate Annuity and Deferred Annuity.
Immediate Annuity – In immediate annuity, the company makes a series of payments to the policyholder for predetermined period or until the death of the policyholder. There is another type of immediate annuity called Lifetime immediate annuity. It is also called Pension.
Deferred Annuity – This is again divided into Fixed Annuity and Variable Annuity. In fixed annuity, the policyholder is going to give a sum of money to the insurance company and in return, the company will pay the policyholder a guaranteed rate of return as per agreement or until the death of the investor. And in variable annuities, the money is invested in different financial tools like mutual funds. Here the return depends on the performance of the funds, which is variable in nature.
Therefore, it depends entirely on the investor regarding the option he or she chooses. However, it is always desirable to have a proper knowledge of the current financial condition for profitable investment.
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment