An annuity is an investment you make through an insurance company. It represents a contractual relationship between you and the company. And, although offered by only the insurance industry, annuities have little, if anything, in common with insurance coverage. Annuities are marketed and sold through insurance agencies, banks, savings & loan (S&L) institutions, brokerage firms, financial planners, and investment advisers.
When you purchase, or invest in, an annuity you are given certain assurances by the insurance company. These promises depend on the company issuing the contract (the investment) and the type of annuity chosen. There are three ways to categorize an annuity: (1) how the money is invested (fixed-rate or variable), (2) when income is desired (immediate or deferred), and (3) if additional monies can be added to the investment (flexible-premium or single-premium). Continue reading ‘What an annuity is and how it works?’ »