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Glossary

Annuity

Insurance Term

1. Fixed annuities - A fixed annuity provides a guaranteed rate of return and a set payment amount for a specific period of time.

2. Variable annuities - A variable annuity allows the purchaser to invest their money in a selection of investment options, typically mutual funds. The performance of these investments can cause the payments to fluctuate.

3. Indexed annuities - An indexed annuity is tied to a specific stock market index such as the S&P 500. The purchaser is guaranteed a minimum rate of return but their payments may also increase based on the performance of the index.

An annuity is commonly used in the insurance industry as a way to provide retirement income for individuals who do not have a pension or who want to supplement their pension. Annuities are often purchased by those who are nearing retirement age, as well as those who have already retired.

In addition to providing a guaranteed stream of income, annuities can also provide tax benefits as the payments are taxed at a lower rate than other types of investment income. Annuities can also help to protect against market volatility and provide peace of mind for retirees who are concerned about outliving their retirement savings.


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