It has been said that fixed rate annuities are perhaps one of the safest annuity product out there in the market. As its name implies, this kind of annuity offers its annuitant a fixed interest rate as included in their contract.
Some annuitants prefer to have stable and sure rates for their annuities. Some annuities, variable annuities in particular, have rates fluctuating from time to time depending on the performance of the investment or the investment company. Well, there is a solution for this now. If you really want to assure that the interest rate will be fixed in a span of time of your annuity contract, then fixed rate annuity may be the right type for you.
First thing first, one should know the different rates insurance companies offer to annuitants. Current rates refer to rate the company decides to credit for a period. The company might assure the annuitant that a rate of 6% will not change for let’ say, 5 years of the contract.
The initial rate at some annuity contracts might be higher than the other rates to follow. This kind of rate is what we call bonus rate. Clearly, its main aim is to give bonus at the starting years of the annuity. It is rather attractive to some prospective annuitants actually. A good example of this is when a contract indicates that at the first three years of investment, the rate is 7% while 5% rate only in the next years. Without explaining this kind of rate to prospective annuitants, especially to those who are not knowledgeable enough about annuity rates might cause misunderstanding and disappointment on their part.
Lastly, renewal rate refers to the rate credited by the insurance company by the end of the period specified in the annuity contract. The company will set the new rate to the annuity, which they may tie with external references or index. All of these should be included in the contract.
The term “fixed” in the fixed annuity is a bit ambiguous and misleading. By being fixed, it means to provide assurance that despite of the fluctuations the investment, the market, or the company encounter, the annuity will not be affected. The amount of money that would be agreed upon will still be the same amount of payment until the end of the term or a period. The rates mentioned above could also be present in the contract depending on the company selling the annuity.
The annuities under deferred fixed annuity and immediate fixed annuity fall in this category. Deferred fixed annuity may guarantee fixed interest rate for a specific period and immediate fixed annuity provides a stream of income that will not change during the payment period. These two types of fixed annuity may be the right choice for someone who wants to assure the stability of rates in his or her annuity.
Insurance companies diverge in so many ways in presenting annuity quotes to prospective clients. Every potential candidate for annuity aims to get hold to the most valuable and best annuity quote. To find a good one, it is important to broaden one’s option. You must look to a couple of different sources. Each insurance company bid for different products and different rates. Thus, it is crucial to take time in choosing one. Two things must always be kept in mind in searching for a good fixed annuity, its features and its rates. These two should always have a balanced combination. Consider the features you might benefit from and carefully examine the rates that would fit your needs and budget.