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Integrated Insurance Management, LLC

Insurance and Risk Management


 
A Ridgeview Family Company
 

Annuity Basics

Disclosure: Each Person and Insurance policy is unique and the following is general information, please contact us for more specifics related to your policy and situation

What Is an Annuity?
Conceptually speaking, annuities can be thought of as a reverse form of life insurance. Life insurance pays the insured upon death, while annuities pay annuitants while they are still living. The academic definition of an annuity is a promise by one party to make a series of payments of a specific value to another for a given period of time, or until a certain event occurs (such as the death of the person receiving the payments). As an actual investment, annuities are retirement vehicles by nature. Investopedia defines an annuity as "a financial product sold by financial institutions that is designed to accept and grow funds from an individual and then pay out a stream of payments to the individual at a later point in time."

Purpose of Annuities
Annuities were originally created by life insurance companies to insure against superannuation, or the risk of outliving one's income stream. Modern annuity products can also help to pay for such things as disability and long-term care, and they can also serve as tax shelters for wealthy individuals whose incomes are too high to allow them to save money in other retirement vehicles such as Individual Retirement Accounts (IRAs).