What Are Annuities? An annuity is just the opposite of life insurance. Life insurance is the systematic accumulation of an estate that is used for protection against financial loss resulting from premature death. In contrast, annuities are a means of securing a steady cash flow during retirement. The period in which the premiums are paid toward the purchase of an annuity is called the The period when the annuity payments are made is called the paid by the individual buying the annuity (called the are the principal and interest has not been returned, it is referred to as the period period. The principal is the premiumm . Interest is earned between the time annuities , accruing tax free but paid for with after-tax dollars. If any portion of benefit. Terminology: Annuities Match the terms relating to the basic terminology and concepts associated with annuities on the left with the descriptions of the terms on the right. Read each description carefully and type the letter of the description in the Answer column next to the correct term These are not necessarily complete definitions, but there is only one possible answer for each term Term Answer Description Single premium annuity contract A. This annuity's monthly income varies as a function of the insurer's actual investment experience Immediate annuity B. This type of guaranteed-minimum annuity guarantees the purchaser a stated amount of monthly income for life in exchange for agreeing to pay a minimum number of years This annuity, if purchased right before retirement, has the stream of monthly benefits beginning a month or so after purchase This type of contract allows cash benefits to be stretched for several years A lump-sum payment purchases this annuity This is the fund available to the purchaser's beneficiaries Installment premium annuity contract C. Survivorship benefit D. Deferred annuity Pure life Life annuity, period E. F. G. When the purchaser dies, the contract terminates and the estate certain or beneficiaries do not receive a refund This type of annuity pays a set amount of monthly income for a specified number of years for the insured and beneficiaries Starting with regular payments (monthly, quarterly, annually) and as low as $100, this annuity is purchased over an extended period of time Annuity certain H. Fixed-rate annuity I. Variable annuity . For this annuity, the insurance company agrees to pay a guaranteed interest rate on your money
