INSURANCE OPTIONS

Annuities

You've undoubtedly heard about annuities since much has being written about them in the last few years and more investment money is being diverted into annuities than ever before. Why? What is an annuity?

In simple terms, an annuity is a contract with a life insurance company to provide for immediate or future payouts in exchange for payments of premiums.

Fixed rate and equity indexed annuities are desirable investment vehicles for that portion of your money that you would like to shelter from the risks of the equity markets.

The security of annuities derives from two principles:

• As an insurance product, reserves equal in value to the premiums invested are purchased in the form of bonds;
• For fixed rate and equity indexed products, only the return on these bonds is invested, which protects the principal from diminution.

While there is an ever growing variety of annuity products in the marketplace, you need to know that an annuity is designed to be held for longer periods of time. While some products have partial liquidity features, the security and performance parameters of an annuity are offered in exchange for an extended investment timeframe. Many annuity products, particularly those that have upfront bonuses, will have surrender charges .