Types of Annuity

Annuity is an agreement between a person and a company to pay the decided amount of the payment, in series or say in the form of instalments. Annuity is generally calculated or related with the insurance companies. Charitable trust can also take the place of the insurance company. Annuities are similar to offerings made by banks. Banks offer different rates, similarly, insurance companies offer returns on annuity investments.

Different types of annuities

There are mainly three Types of Annuities and they are:

  • Fixed annuities
  • Variable annuities
  • Bonus annuities

Types based on payment structure

There are also other types of annuities that depend upon the payment structure and plan. These include the following:

  • Deferred annuities
  • Immediate annuities

Fixed annuities

Fixed annuities are invested, firstly, in high grade corporate links and in the government securities. Investment made in these types of organizations, offer you a guaranteed rate of return, at a fix period of time which is from one to ten years. There are various Types of Fixed Annuities. These are mentioned below.

  • The annuity works like the guaranteed return annuity, and other than this, there is no other annuity which will offer you guaranteed rates. This type of annuity is known as market value adjustment.
  • This is another Type of Annuity, which is known as guaranteed return. This annuity offers you the guarantee, for your investment, that you will receive the same 100% of your investments. There are no fluctuations in the interest rates. Thus, it will reduce your initial investment in the market and for that you need to surrender your contract.

Variable annuities

This annuity helps you to invest in definite funds, into sub-accounts. These accounts are already tied with the current market rates. There are conservative, aggressive and special types of variable annuities and they are;

  • Money Market
  • Fixed Account With Complete Guarantee And Security
  • Government Bonds
  • Small Cap Market Funds
  • Large Caps Funds
  • Mid Cap Market Funds
  • Aggressive Growth And Development
  • Capital Appreciation
  • Rising Market Funds
  • Growth Market
  • Living Benefit Annuity

Bonus annuities

This particular Type of Annuity plan charges penalties, if the owner withdraws the money before the withdrawal period, but it also provides you with the signing bonus up front of 3 to 5%. It's very easy for anyone to get out their money from this plan. This annuity needs to mature for at least seven years.

Deferred annuities :

This is the annuity, where you receive the payment at the starting and at the retirement. In this annuity, you are required to make payment with the whole amount at the starting or at the specified limit of time. With deferred annuity, you are free to decide whether you want to invest in variable or in Fixed Annuity. They are most probably used by the people of United States.

Immediate annuities :

This is the annuity where the investor will receive the returns from the time of his investment made in the annuity. This annuity was started for the people who were in need of immediate return after their investment. In this Annuity, you get the same option of selecting the annuity whether you want to go for annuity fixed with guaranteed or with variable return, which can change according to your performance.