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What You Need To Be Aware Of Annuity Insurance

Annuity insurance is an increasingly popular way for people to invest their money and get a good return on it. If you are thinking about annuity insurance, there are things that you need to inform yourself about. This article will help you to get the facts on life insurance annuity so that you can make the most informed decision possible and avoid the kinds of mistakes that could cost you money!

There are many different life insurance annuity products on the market. It is a good idea to speak to your accountant and taxation expert about which product is best for you. This will take into account many different factors that are very personal – such as your level of risk tolerance – so there is no blanket and simple answer as to which product is right for you, or for anyone else.

The product that is right for you may not be right for your sister or brother, or for your parents or your best friend. It is very important to always seek expert, personal advice on the subject of investing.

Annuity Insurance – What do you need to know?

There are two main types of annuities – fixed annuities and variable annuities. You need to beware because the way in which they work is very different.

Variable annuities leave you open to much more risk due to the volatility of the stock market. In the recent market crash, many people lost a lot of money in this way.

Fixed annuities tend to be a bit safer – they are often invested in mutual funds, where many people invest together. The returns here are lower, but the investments tend to be safer.

Annuities Tax – how does it affect you?

If you are not prepared for annuities tax, it could come as a nasty surprise! Check with your taxation expert for advice, however generally you will have to pay the same tax as your income tax when you withdraw any money from your annuity insurance plan. However, the money is not taxed while it is in the accumulation phase. So, if handled correctly, life insurance annuity can be a good way to minimize your taxation exposure on your investments.

One of the things you definitely need to be very aware of is that when you begin to receive the pay out of your annuity, or when you pass the annuity on through death to your beneficiaries, there can be very serious tax ramifications. The extra money can push you or the beneficiary into a higher tax bracket, which if it is unexpected can be a huge shock when you get your tax bill!

If your fixed annuity insurance plan lets you withdraw early, you should read the fine print as there is a good chance that you will be charged a withdrawal penalty. The penalty can be up to 10%, so it’s a good idea to look closely at this.

Do remember though that life insurance annuity plans tend to have hardship clauses written in to them. So if you are facing a tough time – like getting laid off from your job or suffering a serious disability – you should read your annuity insurance plan and then contact your insurance company to find out what options you have.

Your Life Insurance Annuity Plan

Choosing the right life insurance annuity plan means taking into account a number of factors, such as whether you want a variable or fixed annuity, what kind of pay out you are interested in (do you want to take a lump sum payment or a proper annuity that is paid out until death?) and what your taxation exposure is likely to be.