What Are Annuity And Income Annuity

By Author: Mike Anderson
Total Articles: 32
Comment this article

Annuity can be defined as a series of payment made by an insurance company to the annuitant for a specified period of time at regular intervals. The payouts are fixed and are made on a yearly, semi annual, quarterly or monthly basis. Basically, there are two types of Annuity payments: first is ordinary annuities and second is annuities due.

Under ordinary annuities the payments are made at the end of every period until the time period of the investment matures. For example, bonds, where the insurance company pays coupon interest to the buyer at the end of every six months. On the other hand sometimes the Annuity payments are made at the beginning of each period like that of a rent payment. These are known as annuities due. The annuities are divided into deferred annuity and immediate annuity on the basis of the frequency of the Annuity payments. In immediate annuities the Annuity payments are made at much frequent intervals where as in deferred annuity the Annuity payments are made depending on the nature of the annuity.

If it is a fixed deferred annuity then the holder of ...
... the Annuity will receive a guaranteed rate of return at regular intervals for the time period mentioned in the contract. However, in case of variable deferred annuity the payments depend on the performance of the investment in the market and there are no guaranteed returns.

Everyone wants to live a stress free life after retirement and enjoy whatever they have missed out in fulfilling their responsibilities. However, a relaxed retired life is possible on when one is financially secured. Thus, it is important to make investments in such a way so as to receive an extra income post retirement. This is possible by investing in Income Annuity.

Income Annuity provides maximum benefits at minimum risk. Income Annuity is a type of immediate annuity and in this the annuitants receive the amount of investment along with accrued interest at regular intervals. Income Annuity is said to be the best option for the retirees because it enables the retirees to receive a series if payments post retirement as an additional income. By buying Income Annuity scheme the annuitant can receive payments either for a fixed period say 10 – 15 years or may continue to receive payment throughout their lives.

Thus, Annuity and Income Annuity are financial solutions for the people who are in need for finances.