Fixed Annuities: What is a Fixed Annuity?
By Jorge Hiram Garcia, Your Insurance Advisor | May 19, 2010
A fixed annuity is a type of annuity that guarantees the purchaser or annuity buyer a fixed interest rate of return. This type of annuity is generally the safest type of annuity a consumer can purchase and this type of annuity works best for the majority of annuity buyers. Since consumers buy an annuity for security purposes, not for the investment potential, care should be taken to ensure that the annuity is purchased from a reputable source. Even though a fixed annuity is purchased for safety, given the way the market has been performing lately, a fixed annuity can provide a very effective alternative to other investment products.
The fixed annuity is similar to a bank CD or Certificate of Deposit. The fixed annuity buyer is assured a guaranteed rate of return for a specific period of time, or term. In the majority of cases, the longer the term, the higher the rate of return. Each insurance company will offer different rates of returns and different periods of time, so it is a good idea to shop around to make sure you get the best possible annuity for your needs. Rates may be guaranteed from a period of one to ten or more years.
The important thing to remember about a fixed annuity is that the annuity buyer receives a set rate of return. This rate will be specified in your annuity contract at the time of purchase. This type of an annuity is safe, and a conservative type of investment product which is best suited for those interested in protecting their funds rather than getting a big return on their money. Fixed annuities are guaranteed by the insurance company that issued the policy, but as with any other insurance product, the financial strength of the issuing company is the best way to determine the safety of your fixed annuity.
In the next installment, Your Insurance Advisor will taker a look at variable annuities, and explore the differences between fixed annuities and variable annuities.
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