What are the types of Annuities?
Immediate– Immediate annuity meaning is simple; in this type of plan, there is no accumulation phase. In other words, the plan starts paying off when the vesting age starts. Also, in an immediate annuity plan, the insured has to pay a lump-sum amount as a premium to the insurer. In return, the annuity payment starts right after the tenure for a limited period or a lifetime.
Deferred– This is particularly useful when the plan is specified for retirement. The annuity plan usually starts after the term of the plan is almost about to end. The company will be liable to provide payments that would ensure a certain amount paid at regular intervals to the policyholder. This is an immediate plan if you take the deferral period out of the picture.
Variable– With variable annuities, the risk involved in the plan is more but so is the reward. That being said, it can potentially risky as the payment depends on the profit earned by the company. Regardless, you will get considerable amount if the company makes higher profit. Taking company-specific bonuses and rewards out of the picture, you will receive a guaranteed amount of death benefit along with some intern rewards.
Fixed– A more stable option for people who are not risk-takers. The plan only needs your payment initially. Going forward, you will get a return on your plan for sure. These rewards will be presented to you at a decided interval of time.
Benefits of Annuity
Insurances come with a lot of benefits as it is. Annuity meaning does not only limit to a contract; it comes with a lot of rewards that most people do not take advantage of. By the annuity definition, it is quite clear what does annuity mean and what it does. But what are the benefits of an annuity?
Most of the time, you are required to pay tax on your income which does not leave much to your pocket. However, annuity comes with tax benefits. Hence you will not need to pay tax on them. However, please note that tax laws are subject to change from time to time.
There are some established types of annuities that you can avail. The good news is you can choose an annuity option and get your preferred plan. That being said, you can choose from fixed and/or variable annuity options.
It is always a smart decision to do your homework and then get down to the battlefield. There are many options that you can explore with insurance. But since now you know what does annuity mean. Hopefully, things will be much simpler.