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Sample Insurance Annuity Pension Contract
Annuity refers to a deferred investment which upon annuitization gives a person regular monthly or annual payments over a specified period of time. The time duration can be over a person’s lifetime or during a certain period or a combination of both. |
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Insurance annuity pension contracts are investment contracts that will provide you with income during your retirement. Some annuities are joint and survivor annuities that will provide an income for your spouse incase something untoward happens to you.
There are primarily two types of annuities -- fixed and variable. Fixed annuities are those make fixed payments or payments that increase by a fixed percentage. While variable annuities are those that vary based on the investment performance, and are typically equity mutual funds and bonds.
A point to remember is that annuities are ultimately insurance products issued by companies that issue insurance policies. For annuities and insurance, risks are fundamentally the same. In other words, the insurance company “bets” on the life expectancy of the customer. Insurance companies and you benefit by this so-called bet as the uncertainty of your lifespan is transferred from you to the insurance company and the insurance company in return reduces its risks by pooling many clients. Usually an annuity starts making regular payments to you within a year. It has been seen that many retirees withdraw the assets at the time of retiring from a retirement plan after retirement and use the money to buy an annuity whose payments replace the wages for the rest of their lives. An annuity assures you guaranteed payment or income for life.
There is also a combination annuity which is a combination of retirement savings and retirement plan. Here you have to make regular payments to your annuity for a certain period of time after which you start receiving annuity until you die. This is sometimes linked with life insurance so that if you die, your beneficiary will either receive a lump sum payment or annuity payments.
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