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A fixed annuity is a contract between a buyer (the annuitant) and an insurance company. Payments can be made in a lump sum or as a regular series of payments. The insurance company promises to pay the buyer a guaranteed interest rate on their contributions.
Guaranteed & Minimum Interest RatesThe life insurance company is responsible for the security of the money invested in the annuity and for fulfilling any promise made in the contract. Unlike most bank accounts, annuities are not federally insured. However, state governments have insurance funds that cover annuities and other insurance products. If your fixed annuity company goes bankrupt, the fund would reimburse you for the value of your annuity, up to the statutory limits.
If you are looking for an alternative to lower paying CD’s and savings accounts, a fixed annuity is a conservative option that offers an interest rate guarantee. Annuity interest rates can typically be higher than CD’s and savings accounts.
Work with an insurance broker to find the most competitive interest rate options and to help choose an financially sound insurance company. Annuities can be a valuable piece of a comprehensive investment strategy.
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