An annuity is a life insurance contract that, at maturity,
pays a periodic income benefit for a specific time or the annuitant's
lifetime. From the insurer's standpoint, an annuity presents the opposite
mortality risk from life insurance. Life insurance pays a benefit
when the insured dies. An annuities only pays a benefit if the annuitant
and/or beneficiary is living.
Annuity investments grow tax-deferred until income payments begin or
the owner makes a withdrawal. Annuity growth is dependent upon the interest
rate being paid during the deferred period.
Annuity contracts offer a wide variety of premium and benefit payment
schedules and investment options. An annuity can be purchased for a single
payment or a series of periodic payments. Benefits can be scheduled to
begin immediately or deferred until a specific future date. Benefits can
last for a specific period of time or the lifetime of one or two individuals.
Fixed-income annuities are invested in the insurer's general investment
account. They are legally protected, should the insurer become insolvent.
This type of policy provides cash values that vary with
the performance of an underlying portfolio of investments. You can choose
to allocate your premiums among a variety of investments which offer varying
degrees of risk and reward - stocks, bonds, combinations of both, or accounts
that provide for guarantees of interest and principal. You will receive
a prospectus in conjunction with the sale of a variable product.
The cash value of a variable life policy is not guaranteed, and the policyholder
bears that risk. However, by choosing among the available fund options,
the policyholder can create an asset allocation that meets his or her
objectives and risk tolerance. Good investment performance will lead to
higher cash values and death benefits. On the other hand, poor investment
performance will lead to reduced cash values and possibly the loss of
a policyholder's original investment. Some policies guarantee that the
value cannot fall below a minimum level.