Annuities Insurance

Annuity insurance is a financial product that provides a guaranteed income stream, typically for retirement. It works by you making either a lump sum payment or a series of payments to an insurance company. In return, the insurer agrees to make periodic payments to you, either immediately or at a future date. These payments can last for a specific number of years or for your lifetime. Annuities offer tax-deferred growth, meaning you don’t pay taxes on the earnings until you withdraw them. There are various types of annuities, including fixed, variable, and indexed, each with different features and potential returns. Essentially, annuities act as a form of insurance against outliving your savings in retirement.

While both life insurance and annuities are financial products offered by insurance companies, they serve different purposes. Life insurance provides a death benefit to your beneficiaries when you pass away, protecting them from financial hardship. An annuity, on the other hand, provides income to you while you’re alive, often used for retirement planning. Life insurance protects against the financial risk of dying too soon, while annuities protect against the risk of outliving your savings. Some products, known as annuity life insurance or life insurance annuity contracts, combine features of both. These hybrid products can provide both a death benefit and living benefits, offering a comprehensive approach to financial planning.

Life insurance annuities, also known as annuity contracts with life insurance, combine features of both products. Typically, these work in two phases. During the accumulation phase, you pay premiums which grow tax-deferred, similar to a traditional annuity. If you pass away during this phase, your beneficiaries receive a death benefit, like life insurance. In the payout phase, you receive regular income payments for life or a specified period. If you die during the payout phase, your beneficiaries may receive remaining payments or a separate death benefit, depending on the contract. These products offer the advantage of both income security and a legacy for your loved ones. However, they can be complex, so it’s important to understand the terms and consult with a financial advisor.

While annuities are not insured by the federal government like bank deposits are by the FDIC, they do have certain protections. Annuities are backed by the financial strength of the issuing insurance company. Additionally, most states have guaranty associations that provide some protection if an insurance company becomes insolvent. The level of protection varies by state but typically ranges from $100,000 to $500,000 per contract. It’s important to note that this protection is not the same as FDIC insurance and has limitations. When choosing an annuity, it’s crucial to consider the financial strength and ratings of the insurance company. At UCCU, we partner with highly-rated insurers to provide our members with secure annuity options.