Principles of Risk Management and Insurance, 13th Edition

Types of Annuities

Insurers sell a wide variety of individual annuities. For the sake of convenience and understanding, the major annuities sold today can be conveniently classified as follows:

• Fixed immediate annuity

• Deferred annuity

• Joint life annuity

• Variable annuity

• Equity-indexed annuity

• Longevity annuity (longevity insurance)

Fixed Immediate Annuity

A fixed immediate annuity pays periodic income payments that are guaranteed and fixed in amount; the first payment is due one payment interval from the date of purchase. For example, if the income is paid monthly, the first payment starts one month from the purchase date, or one year from the purchase date if the income is paid annually. A single-premium immediate annuity is an important example ...