Annuity Basics

A lot of insurance companies sell more than just insurance.  Many life insurance companies also sell annuities.  A lot of people have heard of annuities without really knowing what they are.

In the simplest terms, an annuity is like a CD that’s sold by an insurance company instead of a bank.  Some similarities between the two:

  • For a fixed length of time.
  • Penalty for early withdrawal.
  • Fixed interest rate.

And here are some differences:

  • Annuities typically are for ten years or longer, whereas CDs are usually five years or less.
  • Annuities offer higher–sometimes much higher–interest rates than CDs do.
  • Some annuities offer a bonus.

After a certain length of time, you can start getting money from the annuity.  The insurance company looks at the life expectancy of people your age, and uses that figure to decide on a monthly sum of money.  Once you start receiving that money, you get that same amount of money every month for the rest of your life.

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About lifeandhealthadvisor

I teach people about insurance and how money works, and I help people decide which form of safe money is best for them. I operate primarily in the Pikes Peak region.
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