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How do I Purchase an Annuity?

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  • Written By: Luke Arthur
  • Edited By: C. Wilborn
  • Last Modified Date: 04 March 2020
  • Copyright Protected:
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    Conjecture Corporation
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In order to purchase an annuity, you will need to deal directly with an insurance company. You should shop around with multiple providers before you purchase an annuity of any kind. Understanding the type of annuity that you are purchasing as well as all of the terms of the annuity contract is very important. You will then need to make a payment to the insurance company and potentially set up a payment plan for the future.

An annuity is a contract that is agreed upon by an insurance company and an individual. This type of contract is designed to make retirement planning simple for the individual who purchases it. Once the annuity is paid for, the insurance company will then start making annuity payments to the individual for a specific amount of time. The primary advantage of this type of investment is that it provides a guaranteed payment to the investor.

When you want to purchase an annuity, you should start out by shopping around with different insurance providers. Generally, most insurance companies will have many types of annuities for sale. Shopping around will allow you to find the best rates and deals on an annuity contract.

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Once you are ready to purchase an annuity contract from a specific company, you need to make sure that you understand which type of annuity you are purchasing. You could potentially purchase a fixed annuity, a variable annuity, or an equity-indexed annuity. A fixed annuity provides you with a fixed interest rate and a fixed payment. The variable annuity allows you to choose investments for the annuity and provides you with variable payments. The equity-indexed annuity is linked to a financial index and the performance of the annuity depends on the movements of that index.

Make sure that you understand the terms of the contract. For example, some annuities have interest rate caps that put a limit on how much you can earn. You should find out if the annuity will pay for a fixed number of years or if it will pay for the duration of your life. If you have any questions about the terms, do not hesitate to ask your insurance agent.

At this point, you will need to make a payment to the insurance company. You could pay for the entire annuity with a lump sum or choose to make periodic payments. If you want to purchase an annuity with installment payments, you will need to set up a payment plan with the insurance company.

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