About Annuities
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Beginner
Questions |
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- What is an annuity?
By strict definition, the word “annuity” means “an amount
payable annually”. More specifically, an annuity refers to a
contract offered by insurance companies which allows you to save
funds for retirement on a tax-favored basis and then, if you choose,
receive a guaranteed income payable for life or for a certain period
such as five or ten years.
- Who sells annuities?
Only
agents licensed by the states to sell life insurance may sell you an
annuity. This includes every licensed life insurance agent in your
state as well as most financial planners and stock brokers.
- If I purchase an annuity, with whom am I investing?
Annuities
are offered by insurance companies. Annuities are only offered by
insurance companies licensed to underwrite life insurance and
annuities by the state in which you reside. Each such insurance
company is a qualified legal reserve life insurance company subject to
financial requirements specifying the minimum reserves the company
must maintain on its policies.
- How does the law protect my investment?
To
safeguard the funds of its contract holders or policy owners, an
insurance company has to meet strict financial requirements. Most
importantly, these requirements include the establishment of a
reserve which at all times must be equal to the withdrawal or
surrender value of their total block of annuity policies or
contracts. In other words, the insurance company must set aside funds
equal to the surrender value of every annuity contract in force. In
addition to these reserving requirements, state laws also require
certain levels of capital and surplus to further protect their
contract holders or policy owners.
- What are the different types of annuities?
There
are two broad classes of annuities and numerous sub classes of each
class. The two broad classes are (1) immediate annuities and (2)
deferred annuities. Some of the sub classes include fixed deferred,
variable, and equity-indexed annuities.
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Lincoln
Financial Group |
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Hello Future.®
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BlueCross
BlueShield |
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Blue Cross and Blue Shield of Texas is the only
statewide customer-owned health insurer in Texas.
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The Hartford |
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It pays
to start early.
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Learn more about annuities
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