Annuity Quotes Online: Variable Annuities Explained

Annuity is a type of life insurance wherein the policyholder agrees to make payments over a specified period in order to receive steady income during retirement.

Various factors need to be taken into consideration when shopping for annuity. For this reason, it is critical to familiarize ones self on the different aspects of annuity as well as to compare annuity quotes online to ensure affordable annuity.

There are two basic types of annuities, variable and fixed annuity. Fixed annuities come with a pre-determined amount of payment that will remain the same throughout the end of the payment period regardless of outside influences like the return on an investment. On the other hand, variable annuities come with a varied amount of payment. The payment amount will fluctuate according to outside influences including return on an investment.

Various annuity products abound in the insurance industry since the 1980s which increased the competition for traditional life insurance dollars from investment vehicles including mutual funds and Individual Retirement Accounts or IRA.

Today, there are literally hundreds of annuity insurance companies that offer their businesses online and offline. As such, the rates have never been more competitive. For this reason, comparing annuity quotes online is the most effective way to come across affordable annuity with excellent features.

Usually, annuity investors, depending on the type of annuity they purchased, give a specified amount of money to an insurance company in return for a series of payments for a fixed number of years in their lifetime.

The investors have the option to get the payouts immediately eager the initial payment of the premium, as with the case of immediate annuities, or receive them at future dates, as with deferred annuity plans. The disbursements for deferred annuity contract start at least a year after the premium payment.

Deferred annuity is the most common type of annuity because the interest accrues on the invested money is not taxed until the money is disbursed. The advantage of deferred annuity plans is that the policyholder can time the payouts. This can help reduce the total tax liabilities of the investor.

For instance, if a young policyholder is included in a high-income tax bracket, he could invest his money in a deferred annuity with plans to withdraw in the form of annual payments after he retires or when he or she enters the lower income tax bracket. Deferred annuities can either be fixed or variable as well.

Variable annuities allow investors to move their money around into different mutual funds, including bonds, stocks and money-market funds, offered by their respective insurance companies. A young investor also has the option of adopting a more conservative underlying investment portfolio gradually, as time goes by.

This arrangement is very similar to an IRA but the different between variable annuity and IRA is that the federal law limits the maximum amount of money an investor can give in an IRA and the initial investment is tax-deductible whereas the money invested to a deferred annuity is unlimited but not tax-deductible.

There are several drawbacks to purchasing variable annuities, including:

1.Annual management fees
2.Early withdrawal penalty charge
3.Risk of negative return

Some insurance companies offer a combination of life insurance products and variable annuity aptly named variable life insurance. Variable life insurance offer benefits of variable annuity plans as well as benefits of life insurance products. The policyholder will typically pay a single premium or series of premiums for a specified period.

The investors can select from a number of options to convert the policy into an income stream, which entails a stated death benefit. Variable life insurance offer more control over policyholders investments than other types of life insurance. In addition, the surviving beneficiaries are not subject to income tax on the death benefit.

Finding the right variable annuity plans that fit your needs and budget is easy as long as you compare annuity quotes online. The good news is, there are many online insurance companies that give quotes with just simple click of a button.

Compare no less than five annuity quotes online and select the best offer you come across. Finding cheap annuity plans is great however; one should not limit his or her choice solely on the price of the annuity plans.

You need to evaluate each offer as you compare annuity quotes online and select the one, which provides excellent service at reasonable rates. This way, you ensure that you are purchasing annuity from a reliable source without compromising the quality of the product...

About the Author:
Vivian Li is a contributing writer for http://annuityquotes-online.com, a site that provides great information focused on various annuity products available online.

 

No. of Times this article has been viewed : 116
Date Published : Mar 30 2011