Various Types Of Annuity Insurance

Fixed Annuity

Fixed annuities are interest-based vehicles similar to bank-issued CDs, but geared specifically towards retirement savings. Typically, a lump-sum of cash locks in an interest rate ranging from 3% to 10% for a period of 3 to 15 years. The initial deposit — otherwise called the premium — can range from $5,000 to $1,000,000.

Fixed annuities are very low risk, have more liquidity than CDs, are tax-deferred, and typically offer higher yields than bonds, CDs, treasuries, or money market accounts.

Variable Annuity

Variable annuities are long term investments. The longer you let your money build, the more you are likely to gain from it. However, unlike a fixed annuity (where your money sits in an account from which you are paid a fixed income throughout a fixed period), a variable annuity gives you more control over your investment–but also gives you the burden of risk.

Equity Indexed Annuity

An equity indexed annuity is an insurance contract linked to a common market index, such as the S&P 500. If the index grows you're entitled to a majority of the earnings. If the index declines, you're account is protected against losses with a modest baseline rate.

Index annuities are a hybrid between fixed and variable annuities. They're typically invested into with a single up front payment. Unlike fixed annuities, index annuity rates vary based on market performance, and unlike variable annuities, you're typically covered against losses. Growth potential for index annuities is strong, averaging 10-15%, on up years, and 1-3% on down. Unlike variable annuities, index annuities allow you to participate in the market without ever risking principle.