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Annuities
What's an annuity? Annuities are insurance products, but it's different from a life insurance policy that pays death benefits. An insurance company pays annuity benefits while the insured (called the annuitant) is alive rather than after death. Annuity contracts are purchased to help save for retirement and the opportunity to provide an income stream. This is basically how it works: you pay a premium (a payment), or a series of premiums, to the insurance company. An annuity payout -- a series of regular payments over time -- can begin shortly after the premium is paid, or it can be a "deferred" annuity which begins regular income payments at a later time, often many years later. What are the different types of annuities? Generally, the most common types of annuities are flexible premium deferred annuities and single premium deferred annuities.
The Equity-Indexed Annuity (EIA) is a relatively new product that has quickly gained popularity. EIAs offer the opportunity to participate in equity-linked interest rates while risk to principal and previously-credited interest. The Standard and Poor's 500 Composite Stock Price Index (S&P 500®) is the most commonly used Index for EIA's. EIA's can be a single premium deferred annuity or an flexible premium deferred annuity. Why would I want an annuity?
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