An annuity is a financial product designed to provide a regular, guaranteed income stream (backed by the claims-paying ability of the carrier) over a specified period or for the rest of a person’s life. Essentially, it\’s a contract between you and an insurance company in which you make a lump-sum payment called a premium. In return, you receive a series of regular disbursements (payments) that begin either immediately or at some point in the future.
There are three participants involved in an annuity contract (aside from the issuing insurance company), these are: The owner, the person who buys the annuity and pays the premiums, the annuitant, the person who is entitled to receive the annuity payments (the annuitant and owner are typically the same person), and the beneficiaries, who receive the death benefit when the annuitant dies (e.g., a surviving spouse or children etc.).
Annuities are typically used as part of a retirement strategy to ensure a steady flow of income during one\’s post-employment years. They’re often endorsed as a supplement to social security payments. Call us if you or a family member might be looking for this kind of income stream in retirement. We’re always here to help.