The annuity is considered as a contractual product which is used by financial centers and institutions to understand about how funds grow from time to time. It is especially designed to evaluate how the money changes its nature after annuitization and delivers a series of payments to the individuals after a noticeable gap.
Furthermore, the ‘accumulation period’ in annuity is marked as the time before annuity is funded and payouts are handed to the individuals. Later on, the commencement of payments are labelled as ‘annuitization phase’ and it’s when the contract begins.
Different Types of Annuity:
Due to its profound popularity in accountancy, annuities are often evaluated through details and factors regarding a contract. It includes time-duration as well as an assurance about its continuity. In addition, annuities are used to pay out the money for fixed period of time. For example, a contract based on 20 years of duration. The financial institutions have the potential to begin annuities as soon as there’s a lump sum deposit in the account.
1 – Fixed Annuities:
2 – Variable Annuities
Role of Annuity In Buying and Selling:
The annuity-oriented products are commonly showcased by insurance companies along with investment centers to cater to the needs of people in an organized manner. Moreover, for both the natures of business, annuity serves as a natural hedge.
The annuity-oriented products are purchased by people who are looking forward to cherish with guaranteed retirement income plans. Quite often, individuals are targeted with penalties for withdrawing a funds from the lump sum amount resting in the annuity section.