What is an Annuity?

An annuity is a contract or agreement with an insurance or investment company that provides a source of income or series of payments, from the investment either now or at a set future date, such as retirement. There are two basic types of annuities, deferred and immediate. Deferred annuities allow assets to grow tax-deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within a year of purchase.

Annuities Purchase Checklist

Questions to ask an agent or agency when considering the purchase of an annuity

English 0.64 MB 2012

Links

Variable Annuities: Beyond the Hard Sell, FINRA

Should You Exchange Your Variable Annuity?, FINRA

Annuities involve a long-term commitment and are not the right investment tool for individuals looking for short-term opportunities. Current law requires insurance companies and agents offering annuity products to seniors older than age 65 to clearly document the basis for selling the product, including consideration of a senior’s financial and tax status, as well as investment objectives.

Florida law also requires a cover page be fixed to any annuity policy informing the purchaser of the unconditional refund period described above. The cover page must also provide contact information for the issuing company and the selling agent, and the department’s toll-free help line. The cover page is part of the policy.

Carefully review and consider all of the advantages and disadvantages of any new purchase or replacement product. If an offer is made by an agent and/or company to move funds from a current annuity into a new annuity product, it is important to know that the new annuity will include a new surrender charge schedule and the guaranteed minimum interest rate in the new contract may be lower than the current annuity.