Both the annuitant and insurer enter into a deal by which the second party promises to provide a guaranteed income flow for a specific time in return to the investment made by the first party. The individual is allowed to make investment at a time or as a flow of regular installments. As the financial goals and strength vary from one person to another, so the insurance companies have introduced various types of annuities to fit the needs and pockets of the customers. Of all the annuity policies on offer,fixed annuity is the right choice for the risk-averse personalities.
The majority of individuals are unwilling to take risks though higher risk factor is often associated with rewarding return. But as they are not very much sure about the economic scenario of the unpredictable future, so they prefer to stick to the promise of security. It is this mindset of the most investors that has popularized the fixed annuity investment.
The fund of an annuitant grows due to the scheduled investment and interest attachment. The insurance company attests a rate of interest to the annuitant’s fund. In case of fixed annuities this figure of interest does not go beyond the minimum rate as set by the insurance company throughout the period of fund accumulation. In other words, the investor need not burry themselves under a sea of worries when the sluggish growth of economy is infecting all the sectors. The amazing fact is that if the economy is undergoing a consistent process of growth, the annuitant’s fund earns additional interest and thereby emitting extra return for him/her.
Every annuity policy possesses a distinct set of pros and cons and the fixed annuity is not any exception to this axiom. If the intending investors stand to gain from the fixed annuities in the event of plunging financial condition, they also lose a huge sum during the rapid growth period. Though the fixed category also earns extra cash in the event of promising financial condition, still the return does not come closer to the earning experienced by the variable annuity investors.
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