Forms of AnnuitiesMonday, October 12, 2009 1:05 pm
When you decide to invest, it’s important that you explore all sorts of options and annuity is one of the reliable types that you can bet on. It’s good to know about its various forms before you roll out your strategies.
Annuity is only one kind of investment but it contains different kinds and varieties, which are certain to meet different requirements of different investor classes. You need to select the one that fulfills your demand the best. It is good to review the advantage obtained and complement it with the need before you decide to attain one.
There are various kinds of annuities, which an investor should understand to the core.
Level Annuity will offer fixed income every year to the annuity owner for the remaining part of his life. The value offered by level annuity is bigger in the early years than in the afterward years, which is due to the time value of money theory. As the proceeds offered are not adjusted for inflation, the value of money in initial years will be bigger than those offered in afterward years.
It’s the safe type of investment. The yield does not get affected by financial disorder or slump. It does not account for inflation. Therefore, the money power decreases over time and things which you could acquire with the income from level annuity get lesser and lesser.
Investment Linked Annuities comprise an intrinsic risk issue and are consequently appropriate for people who like to take some additional risk to make little additional income in future. Therefore, the proceeds that you would get are not definite. It is not feasible to find out the extent of return either.
Increasing Annuities’ premiums do not alter over the life of the agreement. The death assistance continues to increase as the time passes by. The rise is in the form of a percentage of the face value of the scheme. Growing annuities are utilized by insurance firms to give advantage of rise in the inflation rate to the policy owners.
In Annuities with Profit option, your yield or annuity income is connected to the performance of the selected insurance firm. Therefore, if the insurance firm with which you own the investment performs well, you are likely to profit. Your income is not just based upon the returns of the insurance firm. There is some lowest income fixed further than which the performance of the insurance firm will generate your income. The least income set is based upon the ongoing market conditions and offer a guaranteed amount. Extra income is based on the dividends proclaimed by the insurance firms. Such dividends can be declared either once in a year or semi-yearly.
You have the choice of selecting the rate of bonus also. If you select a bigger rate of bonus, you will have smaller sum of starting income or minimum income.
Thus, the more you know about your investment type, the easier it will get to find the most lucrative one.