General Characteristics of Annuities
Annuities are investment vehicles that offer holders a steady income stream for a fixed period of time or until death. The holder, called the annuitant, invests money with an insurance company, either in a lump sum or in periodic payments. At some agreed-upon time, the insurance company begins distributing payments to the annuitant out of the account. Payments may begin immediately after an initial investment is made (immediate payment annuity) or at some distant point in the future (deferred payment annuity). Payments may be made in one lump sum or periodically, based on the wishes of the annuitant. A periodic payment deferred annuity may schedule payments on a regular monthly or annual basis, or irregularly. The size of the payments depends on the amount deposited.
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Types of Variable Annuities |
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Type of Annuity |
How Purchased |
Payout |