What is an Annuity?

By
Services for Real Estate Pros with Michigan Insurance Agent
An annuity is a contract in which an individual agrees to pay premiums to an insurance company and receives, in exchange, a regular stream of income payments from the issuer.

What is an Annuity?

What is an Annuity? The main benefit of an Annuity is SAFETY 

  • With A fixed Annuity, and Fixed Indexed Annuity the principal investment is guaranteed. This means that you can never lose your investment. (Not Variable Annuity)
  • Every year, any interest is added to the initial invest amount and that becaomes the new guaranteed principal amount..

What is an Annuity? Types of annuities

Depending upon investment goals and need for income, investors can choose an immediate annuity or deferred annuity.

  • Deferred annuities allow you to delay the start of your income payments until a later date of your choice
  • Immediate annuities are designed to make payments to you shortly after your premium payment is made.

What is an Annuity? Interest Structures of an Annuity

  • Fixed 
  • Fixed index
  •  Variable (PRINCIPAL NOT GUARANTEED. See below)


What is an Annuity? Some other main benefits of annuity investing 

  • Tax-deferral: All interest, dividends and capital gains accumulate tax-deferred. Because you do not pay taxes on annuity assets until you access your contract, you may be able to accumulate more than a taxable investment earning the same rate of return¹. Fixed Annuities Income Annuities Fixed Indexed annuities.What is an Annuity?
  • Guaranteed death benefit: Generally, annuities also offer a death benefit, allowing you to pass the annuity proceeds directly to a named beneficiary.  All guarantees are based on the claims paying ability of Hartford Life Insurance Company and Hartford Life and Annuity Insurance Company, and do not apply to the investment performance or safety of the investment options.
  • Lifetime income: You can choose from a variety of annuity payout options, including payouts guaranteed for the duration of your life. 

What is an Annuity? How an annuity works

The life of your annuity can be broken down into two phases: 

  1. Accumulation – Any earnings on the contract accumulate tax-deferred.
  2. Annuitization – You choose an annuity payout option and begin receiving income.

What is an Annuity? Variable Annuities

I personally do not choose to write Variable Annuities. These are  investments that give up the main benefit of the Annuity...Safety. These investments are sold by stock brokers, and licensed securities personnel. I would say that if you want an investment that has all of the risks of a Mutual Fund, then you should invest in a Mutual Fund. As an Insurance Agent, I am very risk averse and I like written guarantees, and in these unstable times guarantees are very important.

What is an Annuity?


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Maury Davis

CIC, CEP - Territory Manager, Combined Insurance
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