Annuity can be defined as “An interest-bearing contract between an individual and a life insurance company that guarantees periodic payments to the individual during a specific time period. On expiry the balance is exhausted. Capital withdrawals are generally not allowed. Concessional treatment in relation to taxation and Centrelink benefits may apply if the annuity is complying.”

In simple terms, annuity is a contract between a person and an insurance company. After getting into annuity contract, a person has to make payment in lump-sum or at some future date. Generally, annuities provide tax-deferred earning growth that may comprise a death benefit and the beneficiary will be paid a certain amount.

There are mainly two different categories of annuities including fixed and variable. Fixed annuities mean investing in government securities or corporate bonds, which provide a specific rate, over a period of one to ten years, and encompass a normal surrender commission, which falls over 7 years. On the other hand, variable annuities mean putting up your purchase payments among various investment alternatives, usually mutual funds. The return that you will get on your payments depends upon the activeness of the investment options that you have chosen.

The other form type of annuity is equity-indexed annuity. After start making lump-sum payments or a series of payments, the insurer provides you a rate of return, which is based on alterations in an equity index, such as S&P, FTSE, DAX, and CAC40. The insurance company assures a minimum return that may differ from each other. After completion of the accretion period, the insurance company will start making periodic payments according to the terms and conditions of your contract.

Variable annuities are regulated by the Security Exchange and Commission (SEC), while fixed annuities are not regulated by the SEC. Equity-indexed annuities combines the features of traditional insurance products and securities.

For more info on annuities, click here or call an Annuity Specialist at AnnuityForLife.com , 1-888-261-6237