What Are The Types of Annuities?

There are two different types of annuities based on when payments to the owner or annuitant are scheduled to begin.  The first type is called a deferred annuity.  Deferred annuities typically delay the payment options for longer than one period after the premium payment.  The other type of annuity is called an immediate annuity.  Immediate annuities differ in that payments typically start to get paid within or on the anniversary of the premium payment.

Both deferred and immediate annuities can be further divided into fixed or indexed annuities depending on the type of guarantee they offer. Fixed annuities will offer a constant rate which is spelled out in the contract that gets credited to the account.   This rate is guaranteed by the insurance carrier during the life of the contract and even though it may fluctuate the rate is guaranteed and spelled out in the contract.  Indexed annuities will offer a variable rate depending on what index the annuity is attached to.  The crediting rate will change and fluctuate depending on the performance of the index.  The return on variable annuities does vary and is not known to the contract owner until they occur.

Finally, annuity types can also be categorized by the way in which money is loaded into the contract.  A single-premium annuity includes a single payment into the account while flexible-premium annuities will allow for multiple payments to load money into the contract, usually using a preset schedule.