Annuity Basics

What is an Annuity?

An Annuity is a contract between you and an insurance company. There are four types of annuities that you can purchase:

  1. Variable
  2. Fixed
  3. Immediate
  4. Index

These annuities are purchased through; a one-time, lump-sum payment, or a series of on-going payments over time. The main purpose of an annuity is income, which can be regular, or a periodic payment. The amount of what you can invest relies on a few factors such as your short and long term goals, composition of current portfolio and your tax situation. With Annuities your investment grows tax deferred, is creditor proof and avoids probate.


Annuity Terms:

Annuity: A guaranteed investment contract with an insurance company

Owner: The owner of annuity contract (can be a trust or the annuitant or a third party)

Beneficiary: To whom the money goes upon the annuitants death (can be the owner)

Annuitant: Person on whom the annuity is based (does not have to be owner). All annuities have annuitants (some annuities allow joint annuitants).


By: Phil Wasserman


Annuities offer amazing features and can protect you against:

  1. Outliving your savings
  2. Risking your principal
  3. Inflation
  4. Taxes

Bonus – Many annuities offer up-front bonuses that add even more to your savings.

Riders – Offer guaranteed income for life and even enhanced income when you become impaired and can’t perform some activities of daily living.


Accelerated Benefits:

Today it is common for annuities to allow for accelerated benefits to pay for:

  • Terminal illness
  • Long term nursing care and home
  • Critical illness (such as cancer, stroke or heart attack)

These powerful benefits are usually included at no cost, although not all annuities have them. Knowing the Riders and Features of your current annuity or annuities you are looking to purchase, can be extremely important.


By: Phil Wasserman