Annuities
A contract issued by a life insurance company to provide a series of periodic payments (stream of payments) to an annuitant(s) for life. The key facts of annuities are:
1. They are usually used for retirement income
2. They can be fixed or variable in structure
Variable Annuities
Variable in structure. Premiums paid by annuity holders go into a separate account and are invested according to the annuity holder's wishes. Variable annuity holders bear the investment risk of the annuity. Variable annuities participate in market movements, offering more risk, but the potential for more returns, and they are classified as securities.
Equity-Indexed Annuities (EIAs)
combine aspects of fixed and variable annuities. Both risks and returns are typically greater than those on fixed annuities, but lower than those on variable annuities. EIAs typically offer a minimum guaranteed return as well as participation linked to a certain index, which is often capped. Surrender charges and fees can negate guaranteed returns.
No comments:
Post a Comment