6 Major Classifications of Annuities

There are number of different types of annuities. Understanding them will help you make sure that you make the correct, educated decision. They can be classified according to:

  • how premiums are paid
  • disposition of proceeds, or what residual values—if any—are paid upon the death of the annuitant
  • when benefit payments begin
  • how many lives are covered
  • what investment options are available to the owner of the annuity contract
  • how benefits are calculated.

It is important to bear in mind that a change in almost any of the above classifications results in an adjustment in the payout the annuity provides to maintain an actuarially equivalent benefit. The chart below shows how annuities are classified.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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