Understanding Annuities Can Lead to More Annuity Sales

I am always amazed about the questions I get from agents regarding the types of annuities available. Annuities come in many shapes and sizes each designed for a specific use. One annuity may have benefits another does not and it is important to know the features and benefits of each contract.

Single premium deferred annuity: As the name implies it is a one time deposit and no further deposits are accepted. A single premium annuity can be many different types such as a fixed annuity, an indexed annuity and a variable annuity. Each of these types of single premium deferred annuities has their own features and benefits. I will discuss each of these later.

Flexible Premium Deferred Annuity: This type of annuity allows for continual or sporadic additional deposits. Each deposit is added to the account value and can be deferred. Variable, indexed and fixed can all be flexible premium annuities.

Single Premium Immediate Annuity: These contracts are used to create an income stream. A single deposit is made and an income will begin at a pre-agreed upon time. These payments to the annuitant can be monthly, annually or most other time periods. Any time period for the payout can be selected from any number of years to a lifetime guaranteed payment.

Variable Annuity: Variable annuities are securities and are sold with a prospectus. Variable annuities allow for the annuitant to designate a specific type of sub account or investment for the funds to be invested in. These sub accounts are like mutual funds in the sense the money is managed by an outside source and there is no limit to the growth of the funds or the exposure to loss. The money in the variable annuity is not at the insurance company but is on deposit at the fund manager. Variable annuities do have a guaranteed rate of return section which usually is a lower rate of interest. Variable annuity owners may switch investments in the annuity in the event of a new investment goal is desired. These changes can be completed without any tax liability. The funds in a variable annuity are not guaranteed and exposure to loss is part of the investment risk. In the event of death, variable annuities will guarantee at least the return of the original investment in the event the account is lower.

Indexed Annuity: Indexed annuities are fixed annuities whose returns are set to an outside source such as the Dow Jones Average. The funds in an indexed annuity are on deposit with the insurance company and not actually invested in the indexes. There are numerous options for selecting the type of crediting rate and how it interfaces with the specific index. One strong positive about indexed annuities is the deposit is fully guaranteed to never lose money and once a new amount is credited to the annuity then that becomes the guaranteed minimum.

Fixed Annuity: Fixed annuities come in all sorts and sizes from a few years contract to a longer period. Some will fully guarantee the interest rates the entire time period while others will allow the insurance company to determine the interest credited year to year. The funds in a fixed annuity always have a minimum interest which is fully guaranteed. Fixed annuities also guarantee the full account value.

Annuities are not for everyone but for those that will benefit from these contracts they can be perfect. Safety and security is the basic attraction to an annuity and when these benefits are needed they can be of enormous value. Developed your expertise, understand which annuity products are right for the unique circumstances and needs of the investor and increase your annuity sales.

Bill Broich is a 30 year annuity salesman who helps agents increase their annuity sales. Visit his website to learn more. Annuity.com